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(Solved) Westerville Company reported the following results from last year's operations:



 

Westerville Company reported the following results from last year’s operations:


 

    Sales$1,000,000   Variable expenses 300,000     Contribution margin 700,000    Fixed expenses 500,000     Net operating income$ 200,000     Average operating assets$625,000   

 

This year, the company has a $120,000 investment opportunity with the following cost and revenue characteristics:


 

    Sales$200,000   

Contribution margin ratio 60 % of sales  

Fixed expenses$90,000 

 The company’s minimum required rate of return is 15%.


1.What is the margin related to this year’s investment opportunity? 

2.What is the turnover related to this year’s investment opportunity? (Round your answer to 2 decimal places.)

3.What is the ROI related to this year’s investment opportunity? (Round your answer to the nearest whole percent.)

4..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))

5. 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.)

 6.

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))

 7.What is last year’s residual income?

8.What is the residual income of this year’s investment opportunity?

9. 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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