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The following data pertain to British Isles Aggregates Company, a producer of sand, gravel, and cement, for the year just ended.

Sales revenue		6,350,000
Cost of goods sold		2,227,000
Operating expenses		3,551,500
Average invested capital		1,587,500

denotes the British pound sterling, the national monetary unit of Great Britain.

Required:

Compute the companys sales margin, capital turnover, and ROI.

Sales margin		%
Capital turnover
ROI		%

A. If the sales and average invested capital remain the same during the next year, to what level would total expenses have to be reduced in order to improve the firms ROI to 40 percent?

	Total expenses must be reduced to

B. Assuming that the expenses and cost of goods sold are reduced in order to improve the firm's ROI to 40 percent, compute the firm's new sales margin.

C. Show how the new sales margin and the old capital turnover together result in a new ROI of 40 percent.

New sales margin

%

New ROI =

%

x

=

40

%