Question
Westerville Company reported the following results from last years operations: Sales $ 1,500,000 Variable expenses 650,000 Contribution margin 850,000 Fixed expenses 580,000 Net operating income
Westerville Company reported the following results from last years operations: |
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Sales | $ | 1,500,000 |
Variable expenses |
| 650,000 |
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Contribution margin |
| 850,000 |
Fixed expenses |
| 580,000 |
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Net operating income | $ | 270,000 |
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Average operating assets | $ | 1,000,000 |
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This year, the company has a $160,000 investment opportunity with the following cost and revenue characteristics: |
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Sales | $ | 240,000 |
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Contribution margin ratio |
| 70 | % of sales |
Fixed expenses | $ | 144,000 |
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The companys minimum required rate of return is 10%. |
1. | What is last years margin? | |||||
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2. | What is last years turnover? (Round your answer to 1 decimal place.) | ||||
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3. | What is last years return on investment (ROI)? | |||||
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4. | What is the margin related to this years investment opportunity? | |||||
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5. | What is the turnover related to this years investment opportunity? (Round your answer to 1 decimal place.) | ||||
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6. | What is the ROI related to this years investment opportunity? | |||||
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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)) | |||||
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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.) | ||||
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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., 0.1234 should be considered as 12.3%.)) | |||||
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10. What is last years residual income?
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11. What is the residual income of this years investment opportunity?
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12. 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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