Required: 1. Compute the company\'s capital turnover for 2017. Enter the number

Question

Required:

1. Compute the company's capital turnover for 2017. Enter the number with four decimal places; e.g., 1.5. (1 point)

2. Compute the company's return on investment (ROI) for 2017. Enter the answer with three decimal places; e.g., 0.308. (1 point)

3. What if the board of directors had set a minimum required rate of return of 15% for the company. What was the company's residual income for 2017? Enter the number without commas, rounded to whole dollars. (1 point)

4. What if the board decides to raise its minimum required rate of return to 20%. What is the company's residual income under that scenario? Enter the number without commas, rounded to whole dollars. (1 point)

Explanation / Answer

1) Capital Turnover ratio: Net Sales / total Assets = $4,056,800/$1,650,000 = 2.4587

2) ROI = Net Income/total Assets = $151,800/$1,650,000 = 0.092 (or 9.2%)

3) ROI is set @15%, hence residual income would be - $1,650,000 x 0.15 = $247,500

4) ROI is set @ 20%; hence residual income would be - $1,650,000 x 0.20 = $330,000

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