Required information The Foundational 15 (LO11-1, LO11-2] (The following information applies to the questions displayed below.) Westerville Company reported the following results from last year's operations: Sales Variable expenses Contribution margin Fixed expenses Net operating income Average operating assets $ 1,400,000 720,000 680,000 470,000 $ 210,000 $ 875,000 At the beginning of this year, the company has a $350,000 investment opportunity with the following cost and revenue characteristics: Sales Contribution margin ratio Fixed expenses $ 560,000 70 8 of sales $ 336,000 The company's minimum required rate of return is 15%. Foundational 11-1 Required: 1. What is last year's margin? Margin Foundational 11-2 2. What is last year's turnover? (Round your answer to 1 decimal place.) Turnover Hulluill required rate of Peturn 15 15%. Foundational 11-3 3. What is last year's return on investment (ROI)?! ROI Foundational 11-4 4. What is the margin related to this year's investment opportunity? Margin The company's minimum required rate of return is 15%. Foundational 11-5 5. What is the turnover related to this year's investment opportunity? (Round your answer to 1 decimal place.) Turnover Foundational 11-6 6. What is the ROI related to this year's investment opportunity? ROI % Foundational 11-7 7. If the company pursues the investment opportunity and otherwise performs the same as last year, what margin will it earn this year? (Round your percentage answer to 1 decimal place (i.e 1234 should be entered as 12.3)) Margin % Foundational 11-8 8. If the company pursues the investment opportunity and otherwise performs the same as last year, what turnover will it earn this year? (Round your answer to 2 decimal places.) Turnover Foundational 11-9 9. If the company pursues the investment opportunity and otherwise performs the same as last year, what ROI will it earn this year? (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be considered as 12.3%.)) ROI % Foundational 11-10 10-a. If Westerville's chief executive officer will earn a bonus only if her ROI from this year exceeds her ROI from last year, would she pursue the investment opportunity? Yes ONO 10-b. Would the owners of the company want her to pursue the investment opportunity? Yes ONo Foundational 11-11 11. What is last year's residual income? Residual income The company's minimum required rate of return is 15%. Foundational 11-12 12. What is the residual income of this year's investment opportunity? Residual income The company's minimum required rate of return is 15%. Foundational 11-13 13. If the company pursues the investment opportunity and otherwise performs the same as last year, what residual income will it earn this year? Residual income Foundational 11-14 14. If Westerville's chief executive officer will earn a bonus only if her residual income from this year exceeds her residual income from last year, would she pursue the investment opportunity? Yes No ine company's minimum required rate of return is 15%. Foundational 11-15 15-a. Assume that the contribution margin ratio of the investment opportunity was 65% instead of 70%. If Westerville's Chief Executive Officer will earn a bonus only if her residual income from this year exceeds her residual income from last year, would she pursue the investment opportunity? Yes No 15-b. Would the owners of the company want her to pursue the investment opportunity? Yes O No
