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The following data pertain to British Isles Aggregates Company, a producer of sand, gravel, and cement, for the year just ended.

Sales revenue	6,250,000
Cost of goods sold	2,475,000
Operating expenses	3,337,500
Average invested capital	1,250,000

denotes the British pound sterling, the national monetary unit of Great Britain.

3-a. Assuming that the expenses and cost of goods sold are reduced in order to improve the firm's ROI to 40 percent, compute the firm's new sales margin.

3-b. Show how the new sales margin and the old capital turnover together result in a new ROI of 40 percent.

Required information

Skip to question

[The following information applies to the questions displayed below.]

The following data pertain to British Isles Aggregates Company, a producer of sand, gravel, and cement, for the year just ended.

Sales revenue	6,250,000
Cost of goods sold	2,475,000
Operating expenses	3,337,500
Average invested capital	1,250,000

denotes the British pound sterling, the national monetary unit of Great Britain.

3-a. Assuming that the expenses and cost of goods sold are reduced in order to improve the firm's ROI to 40 percent, compute the firm's new sales margin.

3-b. Show how the new sales margin and the old capital turnover together result in a new ROI of 40 percent.