$9/9,9/10$

A growing chain is trying to decide which store location to open. The first location $($A$)$ requires a $$500,000$ investment in average assets and is expected to yield annual income of $$80,000.$ The second location $($B$)$ requires a $$200,000$ investment in average assets and is expected to yield annual income of $$44,000.$

$(1)$ Compute the expected return on investment for each location.

$(2)$ Using return on investment, which location $($A or B$)$ should the company open?

Exercise $9-10($Algo$)$ Computing return on investment and residual income; investing decision LO A$1$

Compute return on investment for each center. Using return on investment, which center is most efficient at using assets to generate income?

Assume a target income of $12\%$ of average assets. Compute residual income for each center. Which center generated the most residual income?

Assume the Electronics center is presented with a new investment opportunity that will yield a $14\%$ return on investment. Should the new investment opportunity be accepted? The target return is $12\%.$