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

Question

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

This year, the company has a $162,500 investment opportunity with the following cost and revenue characteristics:

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

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

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?

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))

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.)

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?

  Sales $ 1,300,000       Variable expenses 440,000       Contribution margin 860,000       Fixed expenses 600,000       Net operating income $ 260,000       Average operating assets $ 812,500    

Explanation / Answer

4-

6-

7-

9-

11 - 13

Sales $260,000.00 Contribution $208,000.00 Less: Fixed cost $182,000.00 Net Income (Margin) $26,000.00

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