Question
1) Chance Company reported the following results from last years operations: Sales. . . . . . . . . . . . . .
1) Chance Company reported the following results from last years operations:
Sales. . . . . . . . . . . . . . . . . . . . . $1,500,000
Variable expenses. . . . . . . . . . 800,000
Contribution margin. . . . . . . . . . 700,000
Fixed expenses. . . . . . . . . . . . . 600,000
Net operating income. . . . . . . . . $ 100,000
Average operating assets. . . . . $625,000
This year, the company has a $70,000 investment opportunity with the following cost and revenue characteristics:
Sales. . . . . . . . . . . . . . . . . . . . . $250,000
Contribution margin ratio. . . . . 60% of sales
Fixed expenses. . . . . . . . . . . . . $110,000
The companys minimum required rate of return is 18%.
Required:
If the company pursues the investment opportunity and otherwise performs the same as last year, what margin will it earn this year?
If the company pursues the investment opportunity and otherwise performs the same as last year, what turnover will it earn this year?
If the company pursues the investment opportunity and otherwise performs the same as last year, what ROI will it earn this year?
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