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Kaler Company has sales of $1,350,000, cost of goods sold of $770,000, other operating expenses of $183,000, average invested assets of $4,100,000, and a
Kaler Company has sales of $1,350,000, cost of goods sold of $770,000, other operating expenses of $183,000, average invested assets of $4,100,000, and a hurdle rate of 11 percent. Required: 1. Determine Kaler's return on investment (ROI), investment turnover, profit margin, and residual income. 2. Several possible changes that Kaler could face in the upcoming year follow. Determine each scenario's impact on Kaler's ROI and residual income. (Note: Treat each scenario independently.) a. Company sales and cost of goods sold increase by 5 percent. b. Operating expenses increase by $80,000. c. Operating expenses decrease by 20 percent. d. Average invested assets decrease by $355,000. e. Kaler changes its hurdle rate to 8 percent.
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