Sales, Expenses, Invested Assets, Hurdle Rate on Each $[$LO $10-4,10-5]$

Solano Company has sales of $$720,000,$ cost of goods sold of $$480,000,$ other operating expenses of $$45,000,$ average invested

assets of $$2,150,000,$ and a hurdle rate of $10$ percent.

Required:

Determine Solano's return on investment $($ROI$),$ investment turnover, profit margin, and residual income.

Several possible changes that Solano could face in the upcoming year follow. Determine each scenario's impact on Solano's ROI

and residual income. $($Note: Treat each scenario independently.$)$

a$.$ Company sales and cost of goods sold increase by $40$ percent.

b$.$ Operating expenses decrease by $$9,000.$

c$.$ Operating expenses increase by $20$ percent.

d$.$ Average invested assets increase by $$410,000.$

e$.$ Solano changes its hurdle rate to $16$ percent.

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