Question
Westerville Company reported the following results from last years operations: Sales $ 1,000,000 Variable expenses 300,000 Contribution margin 700,000 Fixed expenses 500,000 Net operating income
Westerville Company reported the following results from last years operations:
Sales $ 1,000,000
Variable expenses 300,000
Contribution margin 700,000
Fixed expenses 500,000
Net operating income $ 200,000
Average operating assets $ 625,000
At the beginning of this year, the company has a $120,000 investment opportunity with the following cost and revenue characteristics:
Sales $ 200,000
Contribution margin ratio 60 % of sales
Fixed expenses $ 90,000
The companys minimum required rate of return is 15%.
6. What is the ROI related to this years investment opportunity? (Do not round intermediate calculations. Round your answer to the nearest whole percent.)
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 entered as 12.3).)
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