Xtre Mel Fitness Inc. is a health dub. The following results were recorded for last year 2 3 4. 5 6 7 8 Sales $4,000,000 Operating Income $300,000 total assets 2000000 Asset Turnover 2 ADA- 1000000 Required: a) Calculate the company's Rol for the past year using margin and turnover. (2 marks) 10 Margin 7.50X 11 Turnover 12 Return on investment 30.00% 3 D) Assume the minimum required rate of return on average operating assets is 14%. Calculate the club's Residual Income. (3 marks) 3 operating income $300,000 $140,000 Residual income $160,000 c) The owner is reviewing growth plans for the business. It is estimated that opening a second health club would increase Total Sales from $4,000,000 to $4,500,000 and Total Operating Income from $300,000 to $360,000, but also increase average operating assets by $380,000 Calculate the revised ROI for the total company assuming a 2nd health club is opened. If the expansion decision is based on ROI, will the second club be opened? Explain why. (6 marks) margin turnover ROI 8.00% 9.78 78.26% Decision Yes