E10-6 (Algo) Calculating Return on Investment, Residual Income, Determining Effect of Changes in Sales, Expenses, Invested Assets, Hurdle Rate on Each [LO 10-4, 10-5]
Solano Company has sales of $700,000, cost of goods sold of $470,000, other operating expenses of $50,000, average invested assets of $2,100,000, and a hurdle rate of 9 percent. Required: 1. Determine Solanos return on investment (ROI), investment turnover, profit margin, and residual income. 2. Several possible changes that Solano could face in the upcoming year follow. Determine each scenarios impact on Solanos ROI and residual income. (Note: Treat each scenario independently.) a. Company sales and cost of goods sold increase by 30 percent. b. Operating expenses decrease by $8,000. c. Operating expenses increase by 10 percent. d. Average invested assets increase by $400,000. e. Solano changes its hurdle rate to 15 percent.
Req 1 Req 2A Req 2B Req 2c Req 2D Req 2E Determine Solano's return on investment (ROI), investment turnover, profit margin, and residual income. (Loss amounts should be indicated with a minus sign. Do not round your intermediate calculations. Enter your ROI and Profit Margin percentage answer to the nearest 2 decimal places, (i.e., 0.1234 should be entered as 12.34%). Round your Investment Turnover answer to 4 decimal places.) Show less % Return on Investment Investment Turnover Profit Margin Residual Income (Loss) % Req 1 Req 2A Req 2B Req 2c Req 2D Reg 2E Several possible changes that Solano could face in the upcoming year follow. Determine each scenario's impact on Solano's ROI and residual income. (Note: Treat each scenario independently.) Company sales and cost of goods sold increase by 30 percent. (Loss amounts should be indicated with a minus sign. Enter your ROI percentage answer to 2 decimal places, (i.e., 0.1234 should be entered as 12.34%.)) Show less % Return on Investment Residual Income (Loss) Req 1 Req 2A Req 2B Req 2c Req 2D Req 2E Several possible changes that Solano could face in the upcoming year follow. Determine each scenario's impact on Solano's ROI and residual income. (Note: Treat each scenario independently.) Operating expenses decrease by $8,000. (Loss amounts should be indicated with a minus sign. Enter your ROI percentage answer to 2 decimal places, (i.e., 0.1234 should be entered as 12.34%.)) Show less % Return on Investment Residual Income (Loss) Req 1 Req 2A Req 2B Req 2c Req 2D Req 2E Several possible changes that Solano could face in the upcoming year follow. Determine each scenario's impact on Solano's ROI and residual income. (Note: Treat each scenario independently.) Operating expenses increase by 10 percent. (Loss amounts should be indicated with a minus sign. Enter your ROI percentage answer to 2 decimal places, (i.e., 0.1234 should be entered as 12.34%.)) Show less % Return on Investment Residual Income (Loss) Req 1 Req 2A Req 2B Req 20 Req 2D Req 2E Several possible changes that Solano could face in the upcoming year follow. Determine each scenario's impact on Solano's ROI and residual income. (Note: Treat each scenario independently.) Average invested assets increase by $400,000. (Loss amounts should be indicated with a minus sign. Enter your ROI percentage answer to 2 decimal places, (i.e., 0.1234 should be entered as 12.34%.)) Show less % Return on Investment Residual Income (Loss) Req 1 Req 2A Req 2B Req 2c Req 2D Req 2E Several possible changes that Solano could face in the upcoming year follow. Determine each scenario's impact on Solano's ROI and residual income. (Note: Treat each scenario independently.) Solano changes its hurdle rate to 15 percent. (Loss amounts should be indicated with a minus sign. Enter your ROI percentage answer to 2 decimal places, (i.e., 0.1234 should be entered as 12.34%.)) Show less % Return on Investment Residual Income (Loss)
