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Zain Company provides business to business services on the internet. Data concerning the most recent year appear below. Sales $4,000,000 Net Operating Income $200,000
Zain Company provides business to business services on the internet. Data concerning the most recent year appear below. Sales $4,000,000 Net Operating Income $200,000 $750,000 20% Average Operating Assets Required Return on Investment Required: Consider each question below independently. Carry out all computation to two decimal places. 5 points a. Compute the Company's Margin, Turnover, Return on Investment (ROI) and Residual Income (RI) b. The company management is considering an additional investment of $80,000 in a project that will generate extra annual net operating income of $12.950. Would the additional investment to be in the best interests of the company to make this investment? Why? c. The entrepreneur who founded the company is convinced that sales will increase by 40% and the net operating income will increase 120%, with no increase in average operating assets. Furthermore, required return on investments decrease from 20% to 18%. What would be the company's ROI and Residual income (RI)? d. The chief financial officer of the company believes a more realistic scenario would be 1,000,000 increases in sales, requiring a 250,000 increase in average operating assets with a resulting 100% increase in net operating income. What would be the company's ROI and RI in this scenario?
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