Westerville Company reported the following results from last year%u2019s 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%u2019s minimum required rate of return is 15%.
1. What is last year’s margin?
2. What is last year’s turnover?
3. What is lat year’s 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?
6. What is the ROI related to this year’s investment opportunity?
7. If the company pursues the investment opportunity adn otherwise performs thesame as last year, what margin wil it earn this year?
8. If the company pursues the investment opportunity adn otherwise performs the same as laye year, what turnover will it earn this year