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

Question

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

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

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

5. What is the turnover related to this year’s investment opportunity?

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

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

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

Explanation / Answer

Q5 1.5 Q8 1.5 Q9 29% Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Current Year Invt Oppurtunity Current +Invt Oppurtunity Paticulars Q5 Q8 Sales      1,500,000.00           300,000.00       1,800,000.00 Average Operating Assets      1,000,000.00           200,000.00       1,200,000.00 Turnover = Sales/ Average operating Assets                      1.50                        1.50                        1.50 Current Year Invt Oppurtunity Current +Invt Oppurtunity Q9 Average Operating Assets      1,000,000.00           200,000.00       1,200,000.00 Return or net operating income         300,000.00             48,000.00           348,000.00 ROI = Net operating income/Avg operating Assets 30.00% 24.00% 29.00% Invt Oppurtunity Sales         300,000.00 Contribution =300,000*60%         180,000.00 Fixed costs         132,000.00 Return or net operating income = 180,000 - 132,000            48,000.00

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