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Westerville Company reported the following results from last years operations:
| | |
| Sales | $ | 1,600,000 |
| Variable expenses | | 700,000 |
| Contribution margin | | 900,000 |
| Fixed expenses | | 660,000 |
| Net operating income | $ | 240,000 |
| Average operating assets | $ | 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 | $ | 520,000 | |
| Contribution margin ratio | | 70 | % of sales |
| Fixed expenses | $ | 312,000 | |
| |
The companys minimum required rate of return is 15%.
1.If the company pursues the investment opportunity and otherwise performs the same as last year, what margin will it earn this year?
2. If the company pursues the investment opportunity and otherwise performs the same as last year, what turnover will it earn this year?
3.If the company pursues the investment opportunity and otherwise performs the same as last year, what ROI will it earn this year?
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