A 15.0 marks The following information is provided for XYZ Company, for the year ended Dec 31, 2021 2 3 4 XYZ Company Income Statement For the year ended Dec 31, 2021 5 Assets 6 7 XYZ Company Balance Sheet Jan 1 2021 Dec 31 2021 $145,000 $170,000 360,000 450,000 590,000 545,000 865,000 810,000 420,000 450,000 325,000 325,000 $2,705,000 $2,780,000 8 9 10 11 Cash Accounts receivable Inventory Plant & equipment (net) Investment in ABC Co. Land (undeveloped) Total Assets Liabilities Accounts payable Long term debt Shareholders equity Total Liabilities & Shareholders' Equity $1,100,000 2,512.000 1,558,000 1,125,000 433,000 120,000 125,200 $187,800 Sales revenue Cost of goods sold Gross margin Selling & admin expense Operating income less interest expense tax expense 40% Net income 12 13 $380,000 1,000,000 1,325,000 5 $340,000 1,000,000 1,440,000 $2,780,000 5 $2,705,000 Other information: The company requires a minimum required rate of return -18% 2.0 Required: Complete the following analysis of XYZ Co. 1 Calculate the following amounts for 2021 > Average operating assets (2 marks) P3 P4 New JP1 P2 SER MENU A 1/ Total Liabilities & Shareholders' Equity $2,705,000 $2,780,000 18 Other information: The company requires a minimum required rate of return 18% 20 21 22 Required: Complete the following analysis of XYZ Co. 1 Calculate the following amounts for 2021 Average operating assets (2 marks) 2.0 23 24 25 20 27 28 29 ROI and the Residual Income for the year ended Dec 31, 2021 (6 marks) 30 2 1 2 3 The business is evaluating a new investment project which will require an increase in average operating assets = $220,000 and is forecasted to generate $44,000 in operating income. Calculate the ROI for this project If the company pays bonus based on ROI, would XYZ managers proceed with the project? (3 marks) POME HA Www * Cur Font Name - Font- Batistep Walet telee Column Yrt Cih Categ- HW Condomate Copy Flirt B 1 Oven no Merge let CLICK HERE TO SAVE YOUR WORK 1 15 36 37 38 39 3 The business is evaluating a new investment project which will require an increase in verge operating assets - $220,000 and is forecasted to generate $14,000 in operating income. Calculate the ROI for this project If the company pays bonus based on ROI, would XYZ managers proceed with the project? (3 marks) 3.0 40 41 42 43 49 46 Based on the ROI calculation, the company would Center Xin highlighted cells to make your choice) proceed with the project not proceed with the project -47 18 40 9 4 Now calculate the Residual Income on the project, assuming the minimum required rate of return = 20%. Based on this calculation would the company proceed with the project? (4 marks) O proceed with the project not proceed with the project Based on the Residual Income calculation, the company should (enter X in highlighted cells to make your choice) P4 Now MP1 P2 P3
