Westerville Company reported the following results from last years operations:

Sales	$	1,800,000
Variable expenses		435,000
Contribution margin		1,365,000
Fixed expenses		1,005,000
Net operating income	$	360,000
Average operating assets	$	1,200,000

At the beginning of this year, the company has a $300,000 investment opportunity with the following cost and revenue characteristics:

Sales	$	360,000
Contribution margin ratio		70	% of sales
Fixed expenses	$	216,000

The companys minimum required rate of return is 10%.

6. What is the ROI related to this years investment opportunity? (Do not round intermediate calculations.)

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., 0.1234 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? (Do not round intermediate calculations. Round your percentage answer to 1 decimal place (i.e., 0.1234 should be considered as 12.3).)

10-a. If 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?

• Yes

• No

10-b. Would the owners of the company want her to pursue the investment opportunity?

• Yes

• No