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Westerville Company reported the following results from last year's operations: Sales$1,200,000Variable expenses420,000Contribution margin780,000Fixed expenses600,000Net operating income$180,000Average operating assets$600,000 This year, the company has a $137,500
Westerville Company reported the following results from last year's operations:
Sales$1,200,000Variable expenses420,000Contribution margin780,000Fixed expenses600,000Net operating income$180,000Average operating assets$600,000
This year, the company has a $137,500 investment opportunity with the following cost and revenue characteristics:
Sales$220,000Contribution margin ratio60% of salesFixed expenses$99,000The company's minimum required rate of return is 20%.
Questions:
- 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))
- 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))
- What is the residual income of this year's 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?
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