The following data relate to Machina Manufacturing Company for the past year:

Sales revenue

$9000 000

Cost of goods sold

$4950 000

Operating expenses

$3600 000

Average invested capital

$4500 000

Required:

Calculate the company's return on sales, investment turnover and ROI for the past year.

If the sales and average invested capital remain the same in the current year, to what level would total expenses have to be reduced in order to increase the firm's ROI to 15 per cent?

Assume that expenses are reduced, as calculated in requirement 2. Calculate the company's return on sales. Show how the new return on sales and the old investment turnover together would result in an ROI of 15 per cent for the current year.