Question: 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

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 B

Location B

million

Cost of New Superstore: 15.0

Residual Value: 5.0

Annual Sales Revenue: 6.0

Annual Cost of Sales: (4.8)

Annual Staff Costs: (0.3)

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

Calculate the Accounting Rate of Return for Option B

Other Annual Costs:(0.1)

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

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