7 A nrm must decide which of three alternatives to adopt to expand its capacity. The firm wishes imum annual profit of 20% of the initial cost of each separable increment of investment. Any money not invested in capacity expansion can be invested elsewhere for an annual yield of 20% of initial cost. Alt. Initial Cost Annual Profit Profit Rate A $100,000 $30,000 B 300,000 C 500,000 30% 22% 16% 66,000 80,000 Which alternative should be selected? Use a challenger-defender rate of return analysis