Westerville Company reported the following results from last year’s operations:
Sales $1,500,000
Variable expenses 650,000
Contribution margin 850,000
Fixed expenses 580,000
Net operating income 270,000
Average operating assets 1,000,000
This year, the company has a $160,000 investment opportunity with the following cost and revenue characteristics:
Sales 240,000
Contribution margin ratio 70% of sales
Fixed expenses 144,000
The company’s minimum required rate of return is 10%
1. What is the % for last year’s margin?
2. What is last year’s turnover? (Round your answer to 1 decimal place.)
3. What is last year’s return on investment (ROI)? ROI______%
4. What is the margin % related to this year’s investment opportunity?
5. What is the turnover related to this year’s investment opportunity? (Round your answer to 1 decimal place.)
6. What is the ROI related to this year’s investment opportunity? ROI______%
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))
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? (Round your percentage answer to 1 decimal place (i.e .1234 should be entered as 12.3))
11. What is last year’s residual income?
12. What is the residual income of this year’s investment opportunity?
13. If the company pursues the investment opportunity and otherwise performs the same as last year, what residual income will it earn this year?