Westerville Company reported the following results from last year’s operations:   Sales $ 1,500,000 Variable expenses 500,000 Contribution margin 1,000,000 Fixed expenses 700,000 Net operating income $ 300,000 Average operating assets $ 1,000,000   At the beginning of this year, the company has a $200,000 investment opportunity with the following cost and revenue characteristics:   Sales $ 300,000   Contribution margin ratio 60 % of sales Fixed expenses $ 132,000     The company’s minimum required rate of return is 10%. If the company pursues the investment opportunity and otherwise performs the same as last year, what ROI will it earn this year?  If the company pursues the investment opportunity and otherwise performs the same as last year, what turnover will it earn this year?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Westerville Company reported the following results from last year’s operations:

 

Sales $ 1,500,000
Variable expenses 500,000
Contribution margin 1,000,000
Fixed expenses 700,000
Net operating income $ 300,000
Average operating assets $ 1,000,000

 

At the beginning of this year, the company has a $200,000 investment opportunity with the following cost and revenue characteristics:

 

Sales $ 300,000  
Contribution margin ratio 60 % of sales
Fixed expenses $ 132,000  

 

The company’s minimum required rate of return is 10%.

 

What is last year’s return on investment (ROI)?

If the company pursues the investment opportunity and otherwise performs the same as last year, what turnover will it earn this year? 

 

Westerville Company reported the following results from last year’s operations:

 

Sales $ 1,500,000
Variable expenses 500,000
Contribution margin 1,000,000
Fixed expenses 700,000
Net operating income $ 300,000
Average operating assets $ 1,000,000

 

At the beginning of this year, the company has a $200,000 investment opportunity with the following cost and revenue characteristics:

 

Sales $ 300,000  
Contribution margin ratio 60 % of sales
Fixed expenses $ 132,000  

 

The company’s minimum required rate of return is 10%.

If the company pursues the investment opportunity and otherwise performs the same as last year, what ROI will it earn this year?

 If the company pursues the investment opportunity and otherwise performs the same as last year, what turnover will it earn this year?

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