Managers in the various divisions at the MegaAuto Company have their performance measured using financial performance measures. For Return on Investment (ROI) measures, the manager earns bonuses based on the increase in ROI over the company average.

MegaAuto is a large retail and services company offering products and services. One division of the company called MegaTune offers motor vehicle repair services. The Division has been running very successfully however it only operates in the Eastern States of Australia.

The following information is forecast for the current MegaTune business division for the coming year:

Profit percentage (Return on Sales): 55%

Sales revenue: $40 000 000

Average capital employed $68 750 000

Additional information:

MegaAuto are considering expanding the business on South Australian and Western Australian sites to become a national operation. The estimated financial outcomes for the coming year of the new expansion would be as follows:

New projected profit percentage:

45%

New TOTAL projected sales revenue:

$50 000 000

ADDITIONAL Average capital required (i.e. ADDED to original capital):

$21 250 000

Required:

Calculate the Return on Investment (ROI) percentage for the Expanded MegaTune Division for the projected (budgeted) year. (1 Mark)

Note answer MUST be given as a percentage using the % symbol. For example if you with to enter 10 percent, enter 10 %