Question
You are the controller of a chain ofdry-cleaning establishments. You are computing the return on investment for each outlet. OutletA, located in a citycore, reported
You are the controller of a chain ofdry-cleaning establishments. You are computing the return on investment for each outlet. OutletA, located in a citycore, reported a net profit of $ 140 comma 000
$140,000. The land on which Outlet A is located was essentially rural when it was purchased for $ 95 comma 000
$95,000. Sincethen, the city hasexpanded, and the land is now located in the population center. Comparable undeveloped land in the immediate area of the outlet is worth $ 1 comma 900 comma 000
$1,900,000. The net book value of the outlet building and equipment is $ 410 comma 000
$410,000. The replacement cost of the building and equipment is $ 1 comma 100 comma 000
$1,100,000. If the outletbuilding, equipment, and land were sold as a goingconcern, the sale price would be $ 1 comma 500 comma 000
$1,500,000. It would cost $ 300 comma 000
$300,000 to demolish the building and clear the property for commercial development.
Requirements
(a)
What is the return on thisinvestment?
Investment/Income= Return on investment
(b)
How would you decide whether this outlet should continue to beoperated, sold as a goingconcern, or demolished and the landsold?
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