Retail Outlet Is Looking for a New Location near a Shopping

question 40

Essay

Retail Outlet is looking for a new location near a shopping centre.It is considering purchasing a building rather than leasing,as it has done in the past.Three retail buildings near a new shopping centre are available but each has its own advantages and disadvantages.The owner of the company has completed an analysis of each location that includes considerations for the time value of money.The information is as follows:
$$\begin{array} { | l | r | r | r | } \hline & \text { Location A } & \text { Location B } & { \text { Location C } } \\\hline \text { Internal rate of return } & 13 \% & 17 \% & 20 \% \\\hline \text { Net present value } & \$ 25000 & \$ 40000 & \$ 20000 \\\hline\end{array}$$
The owner does not understand how the location with the highest percentage return has the lowest net present value.
Required:
Explain to the owner what is (are)the probable cause(s)of the comparable differences.
_____________________________________________________________________________________________
_____________________________________________________________________________________________

---

Definitions:

Uncertainty

A condition of limited knowledge where it is impossible to exactly describe an existing state, future outcomes, or more than one possible outcome.

Unanticipated Ways

Events or outcomes that occur in a manner not previously expected or predicted.

Avoided

The action of deliberately keeping away from or not doing something.

Conflict Management

The practice of identifying and handling conflicts in a sensible, fair, and efficient manner, with the aim of improving learning and group outcomes.