Question
Pecs Alley is a regional chain of health clubs. The managers of the clubs, who have authority to make investments as needed, are evaluated based
Pecs Alley is a regional chain of health clubs. The managers of the clubs, who have authority to make investments as needed, are evaluated based largely on ROI. The Vancouver club reported the following results for the past year:
Sales | $ | 2,400,000 |
Net operating income | 480,000 | |
Average operating assets | 1,080,000 | |
Required:
The following questions are to be considered independently.
1. Compute the club's ROI. (Do not round intermediate calculations. Enter your percentage answer rounded to 1 decimal place (i.e., 0.123 should be entered as 12.3).)
2. Assume that the manager of the club is able to increase sales by $120,000, and, as a result, net operating income increases by $25,600. Further assume that this is possible without any increase in operating assets. What would be the clubs ROI? (Do not round intermediate calculations. Enter your percentage answer rounded to 2 decimal place (i.e., 0.1234 should be entered as 12.34).)
3. Assume that the manager of the club is able to reduce expenses by $24,000 without any change in sales or operating assets. What would be the clubs ROI? (Do not round intermediate calculations. Enter your percentage answer rounded to 2 decimal place (i.e., 0.1234 should be entered as 12.34).)
4. Assume that the manager of the club is able to reduce operating assets by $120,000 without any change in sales or net operating income. What would be the clubs ROI? (Do not round intermediate calculations.)
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