Westerville Company reported the following results from last years operations:

Sales $ 1,300,000 Variable expenses 440,000 Contribution margin 860,000 Fixed expenses 600,000 Net operating income $ 260,000 Average operating assets $ 812,500

This year, the company has a $162,500 investment opportunity with the following cost and revenue characteristics:

Sales $ 260,000 Contribution margin ratio 80 % of sales Fixed expenses $ 182,000 The companys minimum required rate of return is 15%.

1. What is last years margin? 2. What is last years turnover? (Round your answer to 1 decimal place.) 3. What is last years return on investment (ROI)? 4. What is the margin related to this years investment opportunity? 5. What is the turnover related to this years investment opportunity? (Round your answer to 1 decimal place.)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? (Round your percentage answer to 1 decimal place (i.e .1234 should be entered as 12.3)) 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)) 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? No Yes 14. If Westervilles chief executive officer will earn a bonus only if her residual income from this year exceeds her residual income from last year, would she pursue the investment opportunity? Yes No15-a. Assume that the contribution margin ratio of the investment opportunity was 75% instead of 80%. If Westervilles Chief Executive Officer will earn a bonus only if her residual income from this year exceeds her residual income from last year, would she pursue the investment opportunity? No Yes

15-b. Would the owners of the company want her to pursue the investment opportunity? No Yes