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Disney has introduced a new line of merchandise related to its latest animated movie. The first-year financial results are provided below. Income Statement for the
Disney has introduced a new line of merchandise related to its latest animated movie. The first-year financial results are provided below.
Income Statement for the Year Ended December 31, 2023:
- Sales revenue: $3,000,000
- Cost of goods sold: $1,800,000
- Gross margin: $1,200,000
- Operating expenses: $500,000
- Depreciation expense: $150,000
- Operating income: $550,000
- Non-operating items: $30,000
- Net income: $520,000
Balance Sheet as of December 31, 2023:
- Assets:
- Cash: $150,000
- Accounts receivable: $500,000
- Merchandise inventory: $400,000
- Equipment (less accumulated depreciation): $1,000,000
- Total assets: $2,050,000
- Liabilities:
- Accounts payable: $400,000
- Notes payable: $600,000
- Total liabilities: $1,000,000
- Stockholders' equity: $1,050,000
Required:
- Calculate the ROI for Disney’s new merchandise.
- Disney’s headquarters has $200,000 available for investment, seeking an ROI of 12%. Calculate the new ROI if the funds are invested at an ROI of 15%.
- Evaluate the effect on ROI if the funds are invested at an ROI of 8%.
- Discuss the strategic benefits and potential risks of investing additional funds in the new merchandise.
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