Question
Kaler Company has sales of $1,290,000, cost of goods sold of $755,000, other operating expenses of $168,000, average invested assets of $3,800,000, and a hurdle
Kaler Company has sales of $1,290,000, cost of goods sold of $755,000, other operating expenses of $168,000, average invested assets of $3,800,000, and a hurdle rate of 11 percent. Required: 1. Determine Kalers return on investment (ROI), investment turnover, profit margin, and residual income. (Do not round your intermediate calculations. Enter your ROI and Profit Margin answer to the nearest whole percentage, (i.e., 0.1234 should be entered as 12%). Round your Investment Turnover answers to 4 decimal places.) 2. Several possible changes that Kaler could face in the upcoming year follow. Determine each scenarios impact on Kalers ROI and residual income. (Note: Treat each scenario independently.) (Enter your ROI percentage answers to 2 decimal places, (i.e., 0.1234 should be entered as 12.34%.)) a. Company sales and cost of goods sold increase by 5 percent. b. Operating expenses increase by $77,000. c. Operating expenses decrease by 10 percent. d. Average invested assets decrease by $325,000. e. Kaler changes its hurdle rate to 8 percent.
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