2020 Performance Results $82,500,000 BASE CASE A Christchurch manufacturer of cables and electronic components reports the 2020 results shown in the table. Sales COGS 40% $17,500,000 $9,000,000 Transportation Expenses Warehousing Expenses Inventory Carrying Cost Rate Accounts Receivable 20% PROPOSED CHANGES The supply chain manager is working to reduce inventory levels by 30% (given the low inventory turnover rate), but is also concerned that reduced inventories will reduce product availability for fulfilling customer orders. Therefore, a $250,000 investment in new processing equipment will be required. The benefit of this new equipment will be a reduction in COGS to 38% of sales revenue. The new production process will also require a more premium form of transportation for customer delivery so as maintain the current cycle time that customers expect. Transportation costs are expected to rise by 5% over current levels. No other changes are expected. $2,500,000 $14,200,000 Average Inventory Other Current Assets $7,000,000 Fixed Assets $45,000,000 Other Operating Costs $16,000,000 To Do: a) Construct an Income Statement & Balance Sheet (asset portion only) [2 marks] b) Determine Inventory turnover rate, Asset turnover rate, and ROA for this base case [3 Marks] c) Determine Inventory turnover rate, Asset turnover rate, and ROA for the proposed changes [3 Marks] d) Should the manager move ahead with these plans? Explain your recommendation. [2 marks]