Question
[The following information applies to the questions displayed below.] Westerville Company reported the following results from last years operations: Sales $ 1,400,000 Variable expenses 720,000
[The following information applies to the questions displayed below.]
Westerville Company reported the following results from last years operations:
Sales | $ | 1,400,000 |
Variable expenses | 720,000 | |
Contribution margin | 680,000 | |
Fixed expenses | 470,000 | |
Net operating income | $ | 210,000 |
Average operating assets | $ | 875,000 |
At the beginning of this year, the company has a $350,000 investment opportunity with the following cost and revenue characteristics:
Sales | $ | 560,000 | |
Contribution margin ratio | 70 | % of sales | |
Fixed expenses | $ | 336,000 | |
The companys minimum required rate of return is 15%.
5. What is the turnover related to this years investment opportunity? (Round your answer to 1 decimal place.)
6. What is the ROI related to this years investment opportunity?
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))
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.)
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%.))
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