Question
Westerville Company reported the following results from last years operations: Sales $1,500,000 Variable expenses 650,000 Contribution margin 850,000 Fixed expenses 580,000 Net operating income 270,000
Westerville Company reported the following results from last years operations:
Sales $1,500,000
Variable expenses 650,000
Contribution margin 850,000
Fixed expenses 580,000
Net operating income 270,000
Average operating assets 1,000,000
This year, the company has a $160,000 investment opportunity with the following cost and revenue characteristics:
Sales 240,000
Contribution margin ratio 70% of sales
Fixed expenses 144,000
The companys minimum required rate of return is 10%
1-1. What is the % for last years margin?
1-2. What is last years turnover? (Round your answer to 1 decimal place.)
1-3. What is last years return on investment (ROI)? ROI______%
1-4. What is the margin % related to this years investment opportunity?
1-5. What is the turnover related to this years investment opportunity? (Round your answer to 1 decimal place.)
1-6. What is the ROI related to this years investment opportunity? ROI______%
1-7. 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))
1-8. 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.)
1-9. 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))
1-11. What is last years residual income?
1-12. What is the residual income of this years investment opportunity?
1-13. If the company pursues the investment opportunity and otherwise performs the same as last year, what residual income will it earn this year?
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