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Hy's is a nationwide hardware and furnishings chain. The manager of the Hy's Store in Boise is evaluated using ROI. Hy's headquarters requires an ROI
Hy's is a nationwide hardware and furnishings chain. The manager of the Hy's Store in Boise is evaluated using ROI. Hy's headquarters requires an ROI of 8 percent of assets. For the coming year, the manager estimates revenues will be $4.760,000, cost of goods sold will be $2,998,800. and operating expenses for this level of sales will be $476.000. Investment in the store assets throughout the year is $3,510,000 before considering the following proposal. A representative of Ace Appliances approached the manager about carrying Ace's line of appliances. This line is expected to generate $1 440,000 in sales in the coming year at Hy's Boise store with a merchandise cost of $1.094,400. Annual operating expenses for this additional merchandise line total $152,000. To carry the line of goods, an inventory investment of $1,050,000 throughout the year is required. Ace is willing to floor-plan the merchandise so that the Hy store will not have to invest in any inventory. The cost of floor planning would be $129,000 per year. Hy's marginal cost of capital is 8 percent. lgnore taxes. Required: y's Boise store's expected for the comin ROI year if it does not carry Ace's appliances? (Enter "ROI" answer a a percentage rounded to 2 decimal places (i.e., 32.16) What is Regular Merchandise Operating profit Investment ROI b. What is the store's expected ROI if the manager invests in Ace's inventory and carries the appliance line? (Enter "ROI" answer as a percentage rounded to 2 decimal places (i.e., 32.16).) Regular Merchandise & Appliances Operating profit Investment ROI c. What would the store's expected ROI be if the manager elected to take the floor plan option? (Enter"ROI" answer as a percentage rounded to 2 decimal places (i.ee., 32.16).) Expected ROI d. Would the manager prefer (a), (b), or (c) if evaluated using ROl? O The case where the manager elected to take the floor plan option. O The case where Hy's Boise store does not carry Ace's appliances. O The case where the manager invests in Ace's inventory and carries the appliance line
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