A E G 1 B The following information is provided for XYZ Company, for the year ended Dec 31, 2021 H Total M N 2 15.0 marks 3 XYZ Company 4 5 Assets XYZ Company Income Statement For the year ended Dec 31, 2021 6 Cash Accounts receivable 7 8 Balance Sheet Jan 1 2021 Dec 31 2021 $145,000 $170,000 360,000 450.000 590,000 545,000 865,000 840,000 420,000 450,000 325,000 325,000 $2,705,000 $2,780,000 9 Inventory Plant & equipment (net) Investment in ABC CO. Land (undeveloped) Total Assets 10 11 12 Sales revenue Cost of goods sold Gross margin Selling & admin expense Operating income Less: interest expense tax expense @ 40% Net income $4,100,000 2,542,000 1,558,000 1,125,000 433,000 120,000 125,200 $187,800 13 Liabilities 14 15 Accounts payable Long term debt Shareholders equity Total Liabilities & Shareholders' Equity $380,000 1,000,000 1,325,000 $340,000 1,000,000 1,440,000 16 17 $2,705,000 $2,780,000 18 19 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) 23 24 25 26 27 28 29 6.0 30 2 > ROI and the Residual Income for the year ended Dec 31, 2021 (6 marks) 31 32 33 34 35 36 37 38 39 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 Rol 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 44 45 46 Based on the ROI calculation, the company would (enter X in highlighted cells to make your choice) proceed with the project not proceed with the project 47 48 49 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) 50 51 52 53 54 55 56 57 proceed with the project not proceed with the project 58 Based on the Residual Income calculation, the company should (enter X in highlighted cells to make your choice) 59 60 61 62