I need help with question #4 please answer all parts a-e. Thanks. value 100 poin

Question

I need help with question #4 please answer all parts a-e. Thanks.
value 100 points Charle's Furniture Store has been in business for several years. The firm's owners have descrbed the store as a Thigh-price, high-service" operation that provides lots of assistance to its astor ers Margin has averaged a relatively high 36% per year for several years, but tr over has been a relatively low 0.5 based on average total assets of S5 0,000. A discount mure store is about to open in the area served by Chartie's, and management is considering lowering prices to compete effectively Required: a. Calculate current sales and ROl for Charle's Fumiture Store. (Round your "ROI to 1 decimal place) Sales ROI b. ring that ene strategy would roce ma ROI as Charlie's currently eams n to 20%, and assuming that a eraetta' assets would stay the same, ca alte the sa "that wouben ned him hesame you presented the results of your analysis in parts a and b of this problem to Charlie, and he replied, What are you telling me? If I reduce practically double my sales volume to earn the same return? Given the nesuits of your analysis, what is the achual amount of increase in sales required? my prices as planned, then I have to

Explanation / Answer

Question - a

Sales = Average assets * turnover ratio = 5000,000 * 0.50 = 2500,000

ROI = Profit margin * Assets turnover ratio = 36 * 0.50 = 18 %

Question - b

Sales = Average assets * Required turnover ratio = 5000,000 * 0.90 = 4500,000

Required assets turnover = Current ROI / New margin = 18 / 20 = 0.90

Question - c

Increase in sales required = 2000,000

i.e 4500,000 - 2500,000 = 2000,000

Question - d

If the strategy is successful ........... due to increase in advertisement costM, margins will fall. But sales will increase and as a result there will be increase in turnover and ROI

Question - e

Select the options ........... (b) and (c)

Effect on Margin Decrease Effect on Turnover Increase Effect on ROI Increase

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