You are the controller of a chain of dry-cleaning establishments. You are computing the return on investment for each outlet. Outlet A, located in a city core, reported a net profit of $160,000.

The land on which Outlet A is located was essentially rural when it was purchased for $120,000.

Since then, the city has expanded, and the land is now located in the population center. Comparable undeveloped land in the immediate area of the outlet is worth $2,400,000. The net book value of the outlet building and equipment is $305,000. The replacement cost of the building and equipment is $1,500,000. If the outlet building, equipment, and land were sold as a going concern, the sale price would be $1,900,000. It would cost $125,000 to demolish the building and clear the property for commercial development.

Requirements:

a) What is the return on this investment?

b) How would you decide whether this outlet should continue to be operated, sold as a going concern, or demolished and the land sold?

PS: Please give the formula and little explanation on how you solved it