Eastevan Company calculated its return on investment as 10 percent. Sales are no

Question

Eastevan Company calculated its return on investment as 10 percent. Sales are now $500,000, and the amount of total operating assets is $520,000 Required a. If expenses are reduced by $53,300 and sales remain unchanged, what return on investment will result? (Round your answer to 2 decimal places.(i.e., .2345 should be entered as 23.45).) b. If both sales and expenses cannot be changed, what change in the amount of operating assets is required to achieve the same result? (Do not round intermediate calculations. Round your answer to the nearest whole dollar amount.) a. Return on investment b. Operating assets must by

Explanation / Answer

a) Net income = 520000*10% = 52000

Net income = 52000+53300 = 105300

ROI = 105300*100/520000 = 20.25%

b) ROI = Net income*100/operating assets

20.25% = 52000*100/X

0.2025X   = 5200000

X = 256790

Operating assets must reduced by 263210

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