1) What is last year’s margin? 2) What is last year’s turnover? (Round your answ
ID: 2523467 • Letter: 1
Question
1) What is 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)?
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?
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., 0.1234 should be considered as 12.3%.))
10a) If Westerville’s chief executive officer will earn a bonus only if her ROI from this year exceeds her ROI from last year, would she pursue the investment opportunity? Y/N?
10b) Would the owners of the company want her to pursue the investment opportunity? Y/N?
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?
14) If Westerville’s chief executive officer will earn a bonus only if her residual income from this year exceeds her residual income from last year, would she pursue the investment opportunity? Y/N?
15a) Assume that the contribution margin ratio of the investment opportunity was 50% instead of 60%. If Westerville’s Chief Executive Officer will earn a bonus only if her residual income from this year exceeds her residual income from last year, would she pursue the investment opportunity?? Y/N?
15b) Would the owners of the company want her to pursue the investment opportunity? Y/N?
Westerville Company reported the following results from last year's operations: Sales Variable expenses Contribution margin Fixed expenses Net operating income Average operating assets600,000 $ 1,200,000 420,000 780,000 600,000 $180,000 At the beginning of this year, the company has a $137,500 investment opportunity with the following cost and revenue characteristics: Sales Contribution margin ratio Fixed expenses $ 220,000 60% of sales $99,000 The company's minimum required rate of return is 20%.Explanation / Answer
LAST YEAR Sales $ 1,200,000 Variable Expenses $ 420,000 Contribution Margin $ 780,000 Fixed Expenses $ 600,000 Net Operating Income $ 180,000 Average Operating Assets $ 600,000 CURRENT YEAR investment Sales $ 220,000 Variable Expenses $ 132,000 Contribution Margin $ 88,000 Fixed Expenses $ 99,000 Net Operating Income $ (11,000) Average Operating Assets $ 137,500 CURRENT YEAR investment+ last year Sales $ 1,420,000 Variable Expenses $ 552,000 Contribution Margin $ 868,000 Fixed Expenses $ 699,000 Net Operating Income $ 169,000 Average Operating Assets $ 737,500 1. Margin= Net Operating Income/ Sales 180000/1200000 15.00% 2. Last Year's Turnover ratio= Net Sales/ Average Operating Assets 1200000/600000 2.00 3. Return on Investment=Net Operating Income/ Average Operating Assets 180000/600000 30.00% 4. Margin of this year investment opporchunity -11000/220000 -5.00% 5. Turnover Ratio 220000/137500 1.60 6. ROI -11000/137500 -8.00% 7. Margin 169000/1420000 11.9% 8. Turnover Ratio 1420000/737500 1.93 9. ROI 169000/737500 22.9% 10 (a) 22.9%Related Questions
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