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 $70,000. The second location (B) requires a $200,000 investment in average assets and is expected to yield annual income of $40,000. (1) Compute the expected return on investment for each location. (2) Using return on investment, which location (A or B) should the company open? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the expected return on investment for each location. Location A Location B Return on Investment Numerator Denominator = ROI < Required 1 Required 2 >

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 $70,000. The second location (B) requires a $200,000 investment in average assets and is expected to yield annual income of $40,000. (1) Compute the expected return on investment for each location. (2) Using return on investment, which location (A or B) should the company open? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the expected return on investment for each location. Location A Location B Return on Investment Numerator Denominator = ROI < Required 1 Required 2 >

Essentials of Business Analytics (MindTap Course List)

2nd Edition

ISBN:9781305627734

Author:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson

Chapter12: Integer Linear Optimization_models

Section: Chapter Questions

Problem 3P: Spencer Enterprises is attempting to choose among a series of new investment alternatives. The...

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You must prepare a return on investment analysis for the regional manager of Fast & Great Burgers. This growing chain is trying to decide which outlet of two alternatives to open. The first location (A) requires a $500,000 investment and is expected to yield annual net income of $70,000. The second location (B) requires a $200,000 investment and is expected to yield annual net income of $44,000. Compute the return on investment for each Fast & Great Burgers alternative. Using return on investment as your only criterion, which location (A or B) should the company open? (The chain currently generates an 22% return on total assets.)
You must prepare a return on investment analysis for the regional manager of Fast & Great Burgers. This growing chain is trying to decide which outlet of two alternatives to open. The first location (A) requires an average $1,000,000 investment and is expected to yield annual net income of $160,000. The second location (B) requires an average $600,000 investment and is expected to yield annual net income of $108,000. Compute the return on investment for each Fast & Great Burgers alternative. Using return on investment as your only criterion, which location (A or B) should the company open? (The chain currently generates an 18% return on total assets.)
You must prepare a return on investment analysis for the regional manager of Fast & Great Burgers. This growing chain is trying to decide which outlet of two alternatives to open. The first location (A) requires a $500,000 investment and is expected to yield annual net income of $70,000. The second location (B) requires a $200,000 investment and is expected to yield annual net income of $44,000. Compute the return on investment for each Fast & Great Burgers alternative. Using return on investment as your only criterion, which location (A or B) should the company open? (The chain currently generates an 22% return on total assets.) Complete this question by entering your answers in the tabs below. Return on Investment Choice of Location Compute the return on investment for each Fast & Great Burgers alternative. Return on Investment 1 Location A Location B Numerator Denominator 2 of 3 H Next > G O
The CEO of Grace Company, Nicole Grace is debating an investment. The investment is projected to earn $20,000 annually and will require the company to acquire $100,000 in assets. The following chart summarizes Grace’s decision: Before Investment After Investment Operating income 75,000 95,000 Average operating assets 300,000 400,000 Required: Assume Grace is evaluated based on growth in the company’s ROI. Compute the Return on Investment for the company before and after the investment. Would you recommend Grace make the investment? Assume Grace is evaluated based on growth in the company’s residual income. The company’s required rate of return is 15%. Compute the company’s residual income before and after the investment. Would you recommend Grace make the investment?
The CEO of Grace Company, Nicole Grace is debating an investment. The investment is projected to earn $20,000 annually and will require the company to acquire $100,000 in assets. The following chart summarizes Grace’s decision: Before Investment After Investment Operating income 75,000 95,000 Average operating assets 300,000 400,000 Required: Assume Grace is evaluated based on growth in the company’s ROI. Compute the Return on Investment for the company before and after the investment. Would you recommend Grace make the investment? Assume Grace is evaluated based on growth in the company’s residual income. The company’s required rate of return is 15%. Compute the company’s residual income before and after the investment. Would you recommend Grace make the investment? Give at least one advantage and one disadvantage of using measures like ROI and residual income to evaluate company performance.
Risk and return to investment: a buyer for a department store must decide whih designs the stores will carry before he knows what the demand will be in the coming season. The designs, A and B, have the following probability of succeeding and their associate costs with failure. The cost of the initial investment is $30,000. Design A: probability of success (0.80), with a pay-off from success ($90,000), and cost from failure ($50,000). Design B: Probability of success (0.70), pay-off from success ($70,000), and cost from failure ($10,000) Which design should the department store choose based on the expected value of the net benefit? state the expected net return to the project and show work.
Spencer Enterprises is attempting to choose among a series of new investment alternatives. The potential investment alternatives, the net present value of the future stream of returns, the capital requirements, and the available capital funds over the next three years are summarized as follows: Develop and solve an integer programming model for maximizing the net present value. Assume that only one of the warehouse expansion projects can be implemented. Modify your model from part (a). Suppose that if test marketing of the new product is carried out, the advertising campaign also must be conducted. Modify your formulation from part (b) to reflect this new situation.
Suppose you are the financial manager of a large national food processing firm. In your travels, you run across a small regional food processor that you believe will provide your firm with annual returns of over 30%. Returns on your firm’s typical investments are around 20%. Should you propose that your firm acquire this regional food processor? What factors need to be considered in this decision?
Sky High Partners is evaluating a high-rise office building to add to its investment portfolio. To calculate a value, Sky High plans to use the income approach, based on the following estimates: Gross potential yearly rental income Estimated vacancy rate Yearly operating costs Market capitalization rate a. Compute the net operating income (NOI) for the building. Net operating income $ Valuation $ 890,000 2.75% $ 417,000 14% 448,525 b. Using the income approach, calculate the value for the office building. Note: Round your answer to the nearest whole number.
Karamo's Shoe Stores Incorporated is considering opening an additional suburban outlet. An aftertax expected cash flow of $100 per week is anticipated from two stores that are being evaluated. Both stores have positive net present values. Site A Site B Probability Cash Flows Probability Cash Flows 0.2 $ 50 0.1 $ 20 0.2 100 0.2 50 0.2 110 0.2 100 0.4 120 0.2 150 0.3 190 Compute the coefficient of variation for each site. Note: Do not round intermediate calculations. Round your answers to 3 decimal places. Which store site would you select based on the distribution of these cash flows? Use the coefficient of variation as your measure of risk. multiple choice Site A Site B
You are the manager of a specialty retailing firm which is considering two strategies for getting into the Malaysian retail market. Under the first strategy, the firm will make a small initial investment of $ 10 million and can expect to capture about 5% of the overall market share. Under the second strategy, the firm will make a much larger commitment of $ 40 million for advertising and promotion and can expect to capture about 10% of the market share. If the overall size of the market is $ 200 million, the firm’s cost of capital is 12% and the typical life of a project in the firm is 15 years, what would the operating margin have to be for the firm to consider the second strategy? [You can assume that the firm leases its stores and has no depreciation or capital expenditures.]
A manufacturing company is considerign the purchase of new machinery to increase its production capacity. The company has identified a new machine that costs $500,000 and is expected to increase production by 20%. The company expects to sell the additional products for $600,000, resulting in a net profit of $100,000. The company can finance the purchase through a bank loan with an interest rate of 5% over a five year term. What is the expected return on investment (ROI) for the purchase of the new machinery 5% 10% 20% 25%