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Solano Company has sales of $560,000, cost of goods sold of $400,000, other operating expenses of $53,000, average invested assets of $1,750,000, and a hurdle
Solano Company has sales of $560,000, cost of goods sold of $400,000, other operating expenses of $53,000, average invested assets of $1,750,000, and a hurdle rate of 8 percent.
Required:
- Determine Solan's return on investment (ROI), investment turnover, profit margin, and residual income.
- Several possible changes that Solan could face in the upcoming year follow. Determine each scenario's impact on Solan's ROI and residual income. (Note: Treat each scenario independently.)
- Company sales and cost of goods sold increase by 40 percent.
- Operating expenses decrease by $12,500.
- Operating expenses increase by 20 percent.
- Average invested assets increase by $330.000.
- Solano changes its hurdle rate to 14 percent.
Solano Company has sales of $560,000, cost of goods sold of $400,000, other operating expenses of $53,000, average invested assets of $1,750,000, and a hurdle rate of 8 percent.
Required:
- Determine Solan's return on investment (ROI), investment turnover, profit margin, and residual income.
- Several possible changes that Solan could face in the upcoming year follow. Determine each scenario's impact on Solan's ROI and residual income. (Note: Treat each scenario independently.)
- Company sales and cost of goods sold increase by 40 percent.
- Operating expenses decrease by $12,500.
- Operating expenses increase by 20 percent.
- Average invested assets increase by $330.000.
- Solano changes its hurdle rate to 14 percent.
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