What is the ROI related to this year’s investment opportunity? If the company pu
ID: 2531683 • Letter: W
Question
What is the ROI related to this year’s investment opportunity?
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., 0.1234 should be considered as 12.3%.))
What is last year’s residual income?
What is the residual income of this year’s investment opportunity?
If the company pursues the investment opportunity and otherwise performs the same as last year, what residual income will it earn this year?
Required informatio [The following information applies to the questions displayed below.] Westerville Company reported the following results from last year's operations Sales Variable expenses Contribution margin Fixed expenses Net operating income Average operating assets $1,600,000 700,000 900,000 660,000 $240,000 $ 1,000,000 At the beginning of this year, the company has a $325,000 investment opportunity with the following cost and revenue characteristics: Sales Contribution margin ratio Fixed expenses $520,000 70% of sales 312,000 The company's minimum required rate of return is 15%.Explanation / Answer
What is the ROI related to this year’s investment opportunity? Sales 520,000.00 Contribution Margin(70%) 364,000.00 Fixed Expenses 312,000.00 Operating income 52,000.00 Investment 325,000.00 ROI 52000/325000 16% If the company pursues the investment opportunity and otherwise performs the same as last year, what margin will it earn this year? Existing New Investment Total Sales 1,600,000.00 520,000.00 2,120,000.00 Variable expenses 700,000.00 156,000.00 856,000.00 Contribution Margin 900,000.00 364,000.00 1,264,000.00 Contribution Margin 1264000/2120000 60% If the company pursues the investment opportunity and otherwise performs the same as last year, what turnover will it earn this year? Existing New Investment Total Sales 1,600,000.00 520,000.00 2,120,000.00 Therefore, Total Sales will be 2,120,000 What is last year’s residual income? Residual income= Operating Income - Cost of Capital*Operating Assets Residual income= 240000-(1000000*15%) 90,000.00 What is the residual income of this year’s investment opportunity? Residual income= Operating Income - Cost of Capital*Operating Assets operating income 52,000.00 Operating Assets 325,000.00 Residual income= 52000-(325000*15%) 3,250.00 If the company pursues the investment opportunity and otherwise performs the same as last year, what residual income will it earn this year? Residual income= Operating Income - Cost of Capital*Operating Assets Total operating income 52000+240000 292,000.00 Total Operating Assets 1000000+325000 1,325,000.00 Residual income= 292000-(1325000*15%) 93,250.00
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