Question
Kaler Company has sales of $1,430,000, cost of goods sold of $790,000, other operating expenses of $203,000, average invested assets of $4,500,000, and a hurdle
Kaler Company has sales of $1,430,000, cost of goods sold of $790,000, other operating expenses of $203,000, average invested assets of $4,500,000, and a hurdle rate of 12 percent. Required: 1. Determine Kalers return on investment (ROI), investment turnover, profit margin, and residual income. (Loss amount should be indicated by a minus sign. Do not round your intermediate calculations. Round your "Investment Turnover" answer to 4 decimal places and "Return on Investment" & "Profit Margin" answer to 2 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.) a. Company sales and cost of goods sold increase by 10 percent. (Loss amount should be indicated by a minus sign. Do not round your intermediate calculations. Round your "Return on Investment" answer to 2 decimal places.) b. Operating expenses increase by $84,000. (Loss amount should be indicated by a minus sign. Do not round your intermediate calculations. Round your "Return on Investment" answer to 2 decimal places.) c. Operating expenses decrease by 20 percent.(Loss amount should be indicated by a minus sign. Do not round your intermediate calculations. Round your "Return on Investment" answer to 2 decimal places.) d. Average invested assets decrease by $395,000. (Loss amount should be indicated by a minus sign. Do not round your intermediate calculations. Round your "Return on Investment" answer to 2 decimal places.) e. Kaler changes its hurdle rate to 9 percent. (Loss amount should be indicated by a minus sign. Do not round your intermediate calculations. Round your "Return on Investment" answer to 2 decimal places.)
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