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Delta Airlines has recently acquired a smaller regional airline. The following financial statements provide a snapshot of Delta's financial position post-acquisition. Income Statement for the
Delta Airlines has recently acquired a smaller regional airline. The following financial statements provide a snapshot of Delta's financial position post-acquisition.
Income Statement for the Year Ended December 31, 2023:
- Sales revenue: $1,500,000
- Cost of goods sold: $900,000
- Gross margin: $600,000
- Operating expenses: $300,000
- Depreciation expense: $50,000
- Operating income: $250,000
- Non-operating items: $20,000
- Net income: $230,000
Balance Sheet as of December 31, 2023:
- Assets:
- Cash: $50,000
- Accounts receivable: $200,000
- Merchandise inventory: $150,000
- Equipment (less accumulated depreciation): $400,000
- Total assets: $800,000
- Liabilities:
- Accounts payable: $150,000
- Notes payable: $200,000
- Total liabilities: $350,000
- Stockholders' equity: $450,000
Required:
- Calculate the ROI for Delta.
- Delta's headquarters has $150,000 of funds to assign to its divisions, with a desired ROI of 10%. Calculate the new ROI for Delta if the funds are invested at an ROI of 12%.
- Assess the impact on the ROI if the funds are invested at an ROI of 8%.
- Discuss the potential benefits and risks of investing the additional funds in Delta.
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