Hys is a nationwide hardware and furnishings chain The manager of the Hys Store in Boise is evaluated using ROI Hys headquarters requires an ROI of 8 percent of assets For the coming year, the manager estimates revenues will be $4,690,000, cost of goods sold will be $2,954,700, and operating expenses for this level of sales will be $469,000 Investment in the store assets throughout the year is $3,460,000 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 $1,470,000 in sales in the coming year at Hys Boise store with a merchandise cost of $1,117,200 Annual operating expenses for this additional merchandise line total $156,000 To carry the line of goods, an inventory investment of $1,020,000 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 $120,600 per year Hys marginal cost of capital is 8 percent Ignore taxes d Would the manager prefer ( a ), ( b ), or ( c ) if evaluated using ROI The case where the manager elected to take the floor plan option (answer) The case where Hy's Boise store does not carry Ace's appliances The case where the manager invests in Ace's inventory and carries the appliance line e 4 Would the manager prefer ( a ), ( b ), or ( c ) if evaluated using EVA The case where the manager elected to take the floor plan option The case where Hy's Boise store does not carry Ace's appliances The case where the manager invests in Ace's inventory and carries the appliance line Need part e 1 4 It is complete up to part e Required a What is Hy's Boise store's expected ROI for the coming year if it does not carry Ace's appliances (Ente Operating profit Investment Regular Merchandise $ 1,266,300 3,460,000 36 59 ROI b What is the store's expected ROI if the manager invests in Ace's inventory and carries the appliance line Regular Merchandise Appliances Operating profit Investment 1,463,100 4,480,000 32 66 ROL c What would the store's expected ROI be if the manager elected to take the floor plan option (Enter R Expected ROI 38 80 e 1 What is Hy's Boise store's expected EVA for the coming year if it does not carry Ace's appliances Regular Merchandise Operating profit Capital cost Economic value added (EVA) e 2 What is the store's expected EVA if the manager invests in Ace's inventory and carries the appliance line Regular Merchandise Appliances Operating profit Capital cost Economic value added (EVA) e 3 What would the store's expected EVA be if the manager elected to take the floor plan option Floor Plan Operating profit Capital cost Economic value added (EVA)

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Sep 08, 2024

Hys is a nationwide hardware and furnishings chain. The manager of the Hys Store in Boise is evaluated using ROI. Hys headquarters requires an ROI

Hys is a nationwide hardware and furnishings chain. The manager of the Hys Store in Boise is evaluated using ROI. Hys headquarters requires an ROI of 8 percent of assets. For the coming year, the manager estimates revenues will be $4,690,000, cost of goods sold will be $2,954,700, and operating expenses for this level of sales will be $469,000. Investment in the store assets throughout the year is $3,460,000 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 $1,470,000 in sales in the coming year at Hys Boise store with a merchandise cost of $1,117,200. Annual operating expenses for this additional merchandise line total $156,000. To carry the line of goods, an inventory investment of $1,020,000 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 $120,600 per year. Hys marginal cost of capital is 8 percent. Ignore taxes.

image text in transcribed

d. Would the manager prefer (a), (b), or (c) if evaluated using ROI?

	The case where the manager elected to take the floor plan option. (answer)
	The case where Hy's Boise store does not carry Ace's appliances.
	The case where the manager invests in Ace's inventory and carries the appliance line.

image text in transcribed

e-4. Would the manager prefer (a), (b), or (c) if evaluated using EVA?

	The case where the manager elected to take the floor plan option.
	The case where Hy's Boise store does not carry Ace's appliances.
	The case where the manager invests in Ace's inventory and carries the appliance line.

Need part e 1-4. It is complete up to part e.

Required: a. What is Hy's Boise store's expected ROI for the coming year if it does not carry Ace's appliances? (Ente Operating profit Investment Regular Merchandise $ 1,266,300 3,460,000 36.59 % ROI b. What is the store's expected ROI if the manager invests in Ace's inventory and carries the appliance line Regular Merchandise & Appliances & Operating profit Investment 1,463,100 4,480,000 32.66% ROL c. What would the store's expected ROI be if the manager elected to take the floor plan option? (Enter "R Expected ROI 38.80 % e-1. What is Hy's Boise store's expected EVA for the coming year if it does not carry Ace's appliances? Regular Merchandise Operating profit Capital cost Economic value added (EVA) e-2. What is the store's expected EVA if the manager invests in Ace's inventory and carries the appliance line? Regular Merchandise & Appliances Operating profit Capital cost Economic value added (EVA) e-3. What would the store's expected EVA be if the manager elected to take the floor plan option? Floor Plan Operating profit Capital cost Economic value added (EVA)