Montpelier Motorcycle is considering opening a new location. They have narrowed their choices down to two locations. Information Montpelier collected about each option is given below.

Main Street Broad Street

Initial Cost $$770,000$ $$825,000$

Salvage Value $$70,000$ $$75,000$

Average Net Cash Flow $$175,000$ $$200,000$

Annual Depreciation $$60,000$ $$85,000$

If Montpelier uses the average rate of return method to evaluate capital asset decisions, which of the following is correct? Assume a $40\%$ tax rate.

a$.)$

Montpelier should purchase the Broad Street location. The Broad Street location has an average rate of return of $22\mathrm{.}36\%,$ while the Main Street location has an average rate of return of $18\mathrm{.}25\%.$

b$.)$

Montpelier should purchase the Broad Street location. The Broad Street location has an average rate of return of $15\mathrm{.}17\%,$ while the Main Street location has an average rate of return of $12\mathrm{.}23\%.$

c$.)$

Montpelier should purchase the Main Street location. The Main Street location has an average rate of return of $16\mathrm{.}43\%,$ while the Broad Street location has an average rate of return of $15\mathrm{.}33\%.$

d$.)$

Montpelier should purchase the Main Street location. The Main Street location has an average rate of return of $37\mathrm{.}23\%,$ while the Broad Street location has an average rate of return of $33\mathrm{.}75\%.$