The Foundational 15 [LO11-1, LO11-2) The fowowing information applies to the questions displayed below. Westerville Company reported the following results from last year's operations: 1,500,000 Variable expenses contribution margin Pixed expenses Net operating Lneome Average operating assets937 500 At the beginning of this year, the company has a $212.500 investment opportunity with the following cost and revenue characteristics: 340,000 70 of sales Contribution margin ratio ixed expenses 187,000 The company's minimum required rate of return is 10%. 1. What is last year's margin? 2. What is last year's turnover? (Round your answer to 1 decimal place) 3. What is last years return on investment? 4 What is the margin related to this year's investment opportunity? 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 year's 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 s 1234 should be entered as 12 3 & If the company pursues the investment opportunity and otherwise performs the same as last year, what turnover will earn this year? (Round your answer to 2 decimal places.) 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 decimall place (ie 0.1234 should be considered as 12 3%.)) 9. 10. 10-a. If Westerville's chief executive officer will earn a bonus only her ROI from this year exceeds her ROI from last year, would she pursue the investment opportunity? No 10-b. Would the owners of the company want her to pursue the investment opportunity? 11. What is last years residual income? 12. What is the residual income of this year's investment opportunity? 13. If the company pursues the investment opportunity and otherwise performs the same as last year, what residual income will it earn this year? 14. If Westerville's chief executive officer will earm a bonus only if her residual income from this year exceeds her residual income from last year, would she pursue the investment opportunityi Yes 15, 15-a. Assume that the contribution margin ratio of the investment opportunity was 60% instead of 70%. Westerville's Chief Executive Officer will earn a bonus only if her residual income from this year exceeds her residual income from last year, would she pursue the investment opportunity? Yes No 15-b. Would the owners of the company want her to pursue the investment opportunity? No
