With annual sales of $1,200,000 and operating assets of $800,000, Culpeper Company achieved a 10 percent ROI.

Question:

With annual sales of $1,200,000 and operating assets of $800,000, Culpeper Company achieved a 10 percent ROI.
Required
a. If Culpeper reduces expenses by $20,000 and sales remain unchanged, what ROI will result?
b. If Culpeper cannot change either sales or expenses, what change in the investment base is required to achieve the same result you calculated for Requirement a?