Petro Company produces an electronic processor and sells it wholesale to manufacturing and retail outlet at $10 each. In Petro's Year 8 fiscal period, it sold 500,000 processors. Fixed cost for Year 8 total $1,500,000, including interest cost on its 7.5% debentures. Variable costs are $4 per processor for materials. Petro employs about 20 hourly paid plant employees, each earning $35,000 in Year 8. Petro is currently confronting labour negotiations. The plant employees are requesting substantial increases in hourly wages. Petro forecasts a 6% increase in fixed costs and no change either in the processors price or in material cost for the processors. Petro also forecasts a 10% growth in sales volume for Year 9. To meet the necessary increase in production due to sales demand, Petro recently hired two additional hourly plant employees. The condensed balance sheet for Petro at the end of fiscal Year 8 follows (the tax rate is 50%) Assets Current Assets $ 2,000,000.00 2,000,000.00 Cash Liabilities and equity Current Liabilities Long-term 7.5% debenture 5 preferred stock, 10,000 shares, $100 par value Common Stock Receivables $ 700,000.00 1,000,000.00 800,000.00 2,500,000.00 5,500,000.00 $ 8,000,000.00 Other Total current Assets 1,000,000.00 1,800,000.00 1,200,000.00 $ 8,000,000.00 Fixed Assets (Net) Retained earnings Total Assets 1. Compute's Petro's return on invested capital for Year 8 where invested capital is: a Net Operating assets at end of Year 8 (assume all assets and current liabilities are operating) b. Common equity capital at end of Year 8 (8 marks) 2. Calculate the maximum annual wage increase Petro's can pay each plant employee and show a 10% return on net operating assets. Hint: Operating income = 10%*$6,000,000 = 600,000 (12 marks)