4. Flamand Enterprises Ltd. has been operating for a number of years. Selected information from the last three years' audited financial statements is as follows: 2020 2019 2018 Current assets 500,000 600,000 550,000 Total assets 1,400,000 1,700,000 1,500,000 Current liabilities 350,000 340,000 300,000 Total liabilities 730,000 790,000 650,000 Shareholders' Equity 670,000 1,110,000 950,000 Sales revenue $2,100,000 $2,300,000 $1,650,000 Operating income 260,000 275,000 200,000 Net income 300,000 245,000 150,000 Flamand uses ROI to measure performance with return defined as operating income and investment defined as average total assets. The weighted average cost of capital for the firm is 12% 5 Required: a) Calculate ROI for 2020 and 2019, using the Dupont method Explain the change in performance between these two years. If Flamand wants to improve its ROI for 2021 where should it focus its efforts? Explain why you have drawn this conclusion b) A new project has been identified that requires an investment of $140,000 in assets 25 b) A new project has been identified that requires an investment of $140,000 in assets is expected to increase operating profits by $20,300. Should this project be accepted? Explain why your have made this recommendation. Calculate the new overall ROI for 2021 (no need to use DuPont method here) if the new project is accepted, if 2021 results from existing operations are the same as 2020 and this project is the only new investment 5 c) What is the proper tool to use to determine whether a new project should be undertaken? Why would a manager use ROI instead? Which performance measurement tool aligns well with the decision-making tool