Question
Suppose the firm in the above Strategic Profit Model undertakes a supply chain change. It decides to no longer hire transportation service from third parties
Suppose the firm in the above Strategic Profit Model undertakes a supply chain change. It decides to no longer hire transportation service from third parties and instead buys its own trucks, hires drivers, etc. It improves its service level to customers because it can deliver more quickly than the third parties could. The result is a 10% increase in sales. Assume cost of goods sold increases by 10% also because more units are sold. Obviously, some expenses go up and others go down but the net change in total expenses is an increase of $2,000. The new approach requires totally new asset investment of $5,000. Assume other variables do not change. The firms new ROA is closest to?
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