Sales Operating income Invested capital $8,100,000 648,000 9,000,000 In an effort to make something out of nothing and to salvage the current year's performance, Washburn was contemplating implementation of some or all of the following four strategies: a. Write off and discard $102,000 of obsolete inventory. The company will take a loss on the disposal. b. Accelerate the collection of $132,000 of overdue customer accounts receivable. c. Stop advertising through year-end and drastically reduce outlays for repairs and maintenance. These actions are expected to save the division $237,000 of expenses and will conserve cash resources. d. Acquire two competitors that are expected to have the following financial characteristics: Anderson Manufacturing Palm Beach Enterprises Projected Sales $4,740,000 6,990,000 Projected Operating Expenses $3,330,000 6,350,000 Projected Invested Capital $11,750, 000 8,000,000 -a. Determine the ROI of the investment in Anderson Manufacturing and do the same for the investment in Palm Beach Enterp -b. If Washburn wants to maximize ROI, what should the company do?
Sales Operating income Invested capital $8,100,000 648,000 9,000,000 In an effort to make something out of nothing and to salvage the current year's performance, Washburn was contemplating implementation of some or all of the following four strategies: a. Write off and discard $102,000 of obsolete inventory. The company will take a loss on the disposal. b. Accelerate the collection of $132,000 of overdue customer accounts receivable. c. Stop advertising through year-end and drastically reduce outlays for repairs and maintenance. These actions are expected to save the division $237,000 of expenses and will conserve cash resources. d. Acquire two competitors that are expected to have the following financial characteristics: Anderson Manufacturing Palm Beach Enterprises Projected Sales $4,740,000 6,990,000 Projected Operating Expenses $3,330,000 6,350,000 Projected Invested Capital $11,750, 000 8,000,000 -a. Determine the ROI of the investment in Anderson Manufacturing and do the same for the investment in Palm Beach Enterp -b. If Washburn wants to maximize ROI, what should the company do?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Sales
$8,100,000
Operating income
Invested capital
648,000
9,000,000
In an effort to make something out of nothing and to salvage the current year's performance, Washburn was
contemplating implementation of some or all of the following four strategies:
a. Write off and discard $1002,000 of obsolete inventory. The company will take a loss on the disposal.
b. Accelerate the collection of $132,000 of overdue customer accounts receivable.
c. Stop advertising through year-end and drastically reduce outlays for repairs and maintenance. These actions are
expected to save the division $237,000 of expenses and will conserve cash resources.
d. Acquire two competitors that are expected to have the following financial characteristics:
Projected
Sales
Anderson Manufacturing
Palm Beach Enterprises
Projected Operating
Expenses
$3,330,000
6,350,000
Projected Invested
Capital
$11,750,000
8,000, 000
$4,740,000
6,990,000
4-a. Determine the ROI of the investment in Anderson Manufacturing and do the same for the investment in Palm Beach Enterprises.
4-b. If Washburn wants to maximize ROI, what should the company do?
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