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Westerville Company reported the following results from last year s operations: Sales $ 1 , 3 0 0 , 0 0 0 Variable expenses 4
Westerville Company reported the following results from last years operations:
Sales $
Variable expenses
Contribution margin
Fixed expenses
Net operating income $
Average operating assets $
At the beginning of this year, the company has a $ investment opportunity with the following cost and revenue characteristics:
Sales $
Contribution margin ratio of sales
Fixed expenses $
The companys minimum required rate of return is
Required:
What is last years margin?
What is last years turnover? Round your answer to decimal place.
What is last years return on investment ROI
What is the margin related to this years investment opportunity?
What is the turnover related to this years investment opportunity? Round your answer to decimal place.
What is the ROI related to this years investment opportunity?
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 decimal place ie should be entered as
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 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 decimal place ie should be entered as
aIf Westervilles chief executive officer will earn a bonus only if her ROI from this year exceeds her ROI from last year, would she pursue the investment opportunity?
No
Yes
bWould the owners of the company want her to pursue the investment opportunity?
Yes
No
What is last years residual income?
What is the residual income of this years investment opportunity?
If the company pursues the investment opportunity and otherwise performs the same as last year, what residual income will it earn this year?
If Westervilles 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?
No
Yes
aAssume that the contribution margin ratio of the investment opportunity was instead of If Westervilles 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?
No
Yes
bWould the owners of the company want her to pursue the investment opportunity?
Yes
No
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