Problem 14-53 (Algo) ROI, Residual Income, and Different Asset Bases (LO 14-1, 2, 4) Hy's is a nationwide hardware and furnishings chain. The manager of the Hy's Store in Bolse is evaluated using ROI. Hy's headquarters requires an ROI of 8 percent of assets. For the coming year, the manager estimates revenues will be $4,680,000, cost of goods sold will be $2.948.400, and operating expenses for this level of sales will be $468.000. Investment in the store assets throughout the year is $3,400,000 before considering the following proposal A representative of Ace Appliances approached the manager about carrying Ace's line of appliances. This line is expected to generate $1.360.000 in sales in the coming year at Hy's Bolse store with a merchandise cost of $1033,600 Annual operating expenses for this additional merchandise line total $156,000. To carry the line of goods, an inventory investment of $950,000 throughout the year is required. Ace is willing to floor plan the merchandise so that the Hy store will not have to invest in any inventory. The cost of floor planning would be $126.600 per year Hy's marginal cost of capital is 8 percent. Ignore taxes. Required: o. What is Hy's Boise store's expected Rol for the coming year if it does not carry Ace's appliances? b. What is the store's expected on the manager invests in Ace's inventory and carries the appliance line? c. What would the store's expected ROI be if the manager elected to take the floor plan option? d. Would the manager prefer()(b) or (alf evaluated using ROI? e-1. What is Hy's Bolse store's expected residual income for the coming year if it does not carry Ace's appliances? e-2. What is the store's expected residual income if the manager Invests in Ace's Inventory and carries the appliance line? e-3. What would the store's expected residual income be if the manager elected to take the floor plan option? e-4. Would the manager prefer). (6) or (qir evaluated using rescual income? Complete this question by entering your answers in the tabs below. ROGA Req Hec Rego Reg Ei Ang E2 Reg 3 Reg What are the entrarry And Anne RONA Prey 1 of 4 18 Next > https://eztomheducation.com/ext/map/index.html?_con=con&external browser=0&launch Url=https%253A%252F%252Fims.mheducation.co Homework 6 Saved additional merchandise line total $156,000. To carry the line of goods, an inventory investment of $950,000 throughout the year required. Ace is willing to floor plan the merchandise so that the Hy store will not have to invest in any inventory. The cost of floor planning would be $126,600 per year. Hy's marginal cost of capital is 8 percent. Ignore taxes. Required: a. What is Hy's Bolse store's expected Rol for the coming year if it does not carry. Ace's appliances? b. What is the store's expected ROI if the manager invests in Ace's inventory and carries the appliance line? c. What would the store's expected ROI be if the manager elected to take the floor plan option? d. Would the manager prefer (2)(b) or (alf evaluated using ROI? e-1. What is Hy's Boise store's expected residual income for the coming year if it does not carry Ace's appliances? e-2. What is the store's expected residual income If the manager invests in Ace's inventory and carries the appliance line? e-3. What would the store's expected residual income be if the manager elected to take the floor plan option? e-4. Would the manager prefer (e), (6), or (if evaluated using residual income? Complete this question by entering your answers in the tabs below. Rega ReqB Regc Reg D Reg E1 Req E2 Reg 03 Reg 14 What is Hy's Bolse store's expected Rol for the coming year if it does not carry Ace's appliances? (Enter "ROI" answer as a percentage rounded to 2 decimal places (ie, 92.16).) Regular Merchandise Operating profit Investment ROI RA ReqB > Prov 1.4 38: MA
