Question
Westerville Company reported the following results from last years operations: Sales $ 1,200,000 Variable expenses 420,000 Contribution margin 780,000 Fixed expenses 600,000 Net operating income
Westerville Company reported the following results from last years operations: |
Sales | $ | 1,200,000 |
Variable expenses | 420,000 | |
Contribution margin | 780,000 | |
Fixed expenses | 600,000 | |
Net operating income | $ | 180,000 |
Average operating assets | $ | 600,000 |
This year, the company has a $137,500 investment opportunity with the following cost and revenue characteristics: |
Sales | $ | 220,000 | |
Contribution margin ratio | 60 | % of sales | |
Fixed expenses | $ | 99,000 | |
The companys minimum required rate of return is 20%.
1. What is last year's margin?
2. What is last years turnover? (Round your answer to 1 decimal place.)
3. What is last year's return on investment (ROI)?
4. What is the margin related to this year's investment opportunity?
5. What is the turnover related to this year's 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 (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 .1234 should be entered as 12.3))
12. What is the residual income of this year's investment opportunity?
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