Which project should be accepted based on the below information?

I understand the higher the arr the more profitable the project.

Option A

Annual Profit 1.00

Average Investment 25.00

Accounting Rate of Return 4.00

Option B

Annual Profit 0.66

Average Investment 14.00

Accounting Rate of Return 4.71

You have been engaged as a management consultant by Scylace plc, a grocery retail chain. You have been asked to evaluate two alternative proposals for a new superstore. You have the option to build the superstore at one of two locations. The cost of building the new superstore and the annual sales revenue and costs are as follows:

Option A

Location A

million

Cost of New Superstore40

Residual Value 10

Annual Sales Revenue 13

Annual Cost of Sales.(9.1)

Annual Staff Costs (1.2)

Other Annual Cost (1.1)

Option B

Location B

million

Cost of New Superstore25

Residual Value 3.0

Annual Sales Revenue 10

Annual Cost of Sales.(7.0)

Annual Staff Costs (1.1)

Other Annual Cost (0.8)

Depreciation is to be charged on a straight line basis over a period of 50 years, taking account of the residual value.