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Title: Retail Outlet is looking for a new location near a shopping mall. It is considering purchasing a ... Post by: ashly138 on Nov 8, 2017 Retail Outlet is looking for a new location near a shopping mall. It is considering purchasing a building rather than leasing, as it has done in the past. Three retail buildings near a new mall are available but each has its own advantages and disadvantages. The owner of the company has completed an analysis of each location which includes considerations for the time value of money. The information is as follows:
Location A Location B Location C Internal rate of return 13% 17% 20% Net present value $25,000 $40,000 $20,000 The owner does not understand how the location with the highest percentage return has the lowest net present value. Required: Explain to the owner the probable cause(s) of the comparable differences. Title: Re: Retail Outlet is looking for a new location near a shopping mall. It is considering purchasing a ... Post by: GarretA on Nov 8, 2017 Location C may have a much lower initial investment than the other two. Therefore, it could show a higher rate of return with fewer dollars of inflow. Unfortunately, this may cause it to have the lowest net present value since this model is presented in dollar terms. Location C could also have a shorter life which could give it a higher percentage return during its life but fewer dollars overall.
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