Westerville Company reported the following results from last years operations:

Data

Sales $1,500,000

Variable expenses 500,000

Contribution margin 1,000,000

Fixed expenses 500,000

Net operating income 500,000

Average operating assets $1,000,000

This year the company has a $300,000 investment opportunity with the following cost and revenue characteristics: The companys minimum required rate of return is 25%

Data

Sales $500,000

Contribution margin ratio 55% of sales

Fixed expenses $150,000

1.

What is last years margin?

2.

What is last years turnover?

3.

What is last years ROI?

4.

What is the margin related to this years investment opportunity?

5.

What is the turnover related to this years investment

opportunity?

6.

What is the ROI related to this years 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?

8.

If the company pursues the investment opportunit

y and otherwise

performs the same as last year, what turnover will it earn this year?

9.

If the company pursues the investment opportunity and otherwise

performs the same as last year, what ROI will it earn this year?

10.

If Westervilles CEO will earn a bonus on

ly if her ROI from this

year exceeds her ROI from last year, would she pursue the

investment opportunity? Would the owners of the company want

her to pursue the investment opportunity?

11.

What is last years RI?

12.

What is the RI of this years investment opport

unity?

13.

If the company pursues the investment opportunity and otherwise

performs the same as last year, what RI will it earn this year?

14.

If Westervilles CEO will earn a bonus only if her RI from this

year exceeds her RI from last year, would she pursue the

investment opportunity?

15.

Assume that the contribution margin ratio of t

he investment

opportunity was 45% instead of 55

%. If Watervilles CEO will

earn a bonus only if her RI from this year exceeds her RI from last

year, would she pursue the investment oppor

tunity? Would the

owners of the company want her to pursue the investment

opportunity?