Brown Ventures is seeking to make investments in the sport entertainment industry. They are trying to decide between the following 2 investments and have, through their due diligence process, gathered the following information:
|
Brady Centers |
Kraft Sports |
|
|
Sales |
6,000,000 |
15,000,000 |
|
Net Income |
$750,000 |
1,300,000 |
|
Depreciation Expense |
$70,000 |
120,000 |
|
Interest Expense |
$80,000 |
360,000 |
|
Assets Being Purchased |
$ 3,000,000 |
$6,000,000 |
Brown Ventures has a minimum return on investment target of 12%. Please prepare a comprehensive analysis to help decide which investment to make. Do not round intermediate calculations.
| We have to calculate return on Investment | ||||
| Net operating Income/Operating assets | ||||
| As the tax rate is not given hence we cant calculate so will use the other formula | ||||
| Net Income/Investment Made | ||||
| Brady Centres | Kraft sports | |||
| Net Income N | $750,000 | 1300000 | ||
| Assets being purchased A | $3,000,000 | $6,000,000 | ||
| ROI= N/A | 25 | 21.67 | % | |
| Brady is better as it produces 25% return, so it should be accepted |
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