Answer 4 to 6 Problem 4 (ROI Calculations with Varying Assumptions)Knix Products is a division of Park Textiles, Inc. During the coming year, itexpects to earn a net operating income of P310,000 based on sales ofP3.45million; without any new investments, the division will have average netoperating assets of P3 million. The division is considering a capital investmentproject- adding knitting machines to produce gaiters - that requires an additionalinvestment of P600,000 and increases net operating income by P57,500 (saleswould increase by P575,000). If made, the investment would increase beginningnet operating assets by P600,000 and ending net operating assets by P400,000.Assume that the minimum rate of return required by the company is 7 percent. 5. Assume that a JIT purchasing and manufacturing system is installed,investment. Compare these with the old ratios., Compute the margin and turnover ratios for the division with the newAssume that a JIT purchasing and manufacturing system is installed,reducing average operating assets by P800,000. Compute the ROI withand without the investment under this new scenario. Now do you thinkthe divisional manager will accept the new investment? Should he acceptit? Explain your answer.6. Refer to Requirement 5. Compute the margin and turnover ratios withoutthe investment. Use these ratios to explain why the ROI increases.

(4). Margin after the new investment = Net Income / Sales…

Problem 4 (R ulati ying Knix Products is a division of Park Textiles, Inc. During the coming year, it a net operating income of P310,000 based on sales of P3.45million; without any new investments, the division will have average net expects to earn Th dvicion ic considering a canital investment :11:

Problem 4 (R ulati ying Knix Products is a division of Park Textiles, Inc. During the coming year, it a net operating income of P310,000 based on sales of P3.45million; without any new investments, the division will have average net expects to earn Th dvicion ic considering a canital investment :11:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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