14-50, 14-52 xG Hy\'s is a nationwide har \\ e Chegg Study | Guided S C O ezto.m
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14-50, 14-52 xG Hy's is a nationwide har e Chegg Study | Guided S C O ezto.mheducation.com/hm.tpx?--0.8801 839262610651-151 19921 76868 Apps Education Q Accounting 202 Cha Q Chapter 4 and 22: IncAnswers Hy sis a nation de hardware and furnishings chan The manager o he Hys Sore in Bolseis evaluated using ROI Hys headquarters requres an RO of 8 percent o assets. For the coming year, he manager estimates revenues wil be S4680 000 cos of goods sold will be S2 934,000, and aperating expenses for this level of sales will be $468,000. Investment in the store assels throughout the year is $3,375,000 before considering the following proposal. A representative of Ace Appliances approached the manager about carrying Ace's ine of appliances. This Ine is expected to generale S1,350,000 in sales in the coming year at Hy's Boise store with a merchandise cost of $1,026,000. Annual cperating expenses for this additional merchan se ne otal $153 000 To carry the ne of oods an m en ory i vestment of $990 000 throughout the ye s required. Ace s willing ID foar p an the merchandse so that the Hy store wil not have to mest in any im entory The cost of floor planning would be $121,500 per year. Hy's marginal cost of capital is 8 percent. Ignore taxes Required: a. What is Hys Base stores e pected ROI for the coming year if it does not camy Aces appiances? Enter "Ror answer as a percentage rounded to 2 decimal place% ie 32.16). Operating pot S Investmen .800 b. What the stores expected RO·if the manager mess in Aces! en ory and cames the appliance line? Enter-Ror'answer as a percentage rounded to 2 decimal places ie. 32.16) Operating profit c. What would the store's expected ROl be if the manager elected to take the floor plan option? (Enter RO" answer as a percentage rounded to 2 decimal places (i.e., 32.16)) d. Would the manager prefer (o), (b), or (c) if evaluated using RO1? The case where the menager eected to take the floor plan option. The case where Hy's Boise store does not carry Ace's appliances The case where the menager invests in Ace's nventory and carries the appiance in e-1. Whaf is the Hy's Baise store's expected EVA for the coming year if it does not carry Ace's appiances? 2-18 PM 11/29/2017Explanation / Answer
Answer: a) Revenue 4680000 COGS 2934000 Operating expenses 468000 Operating Profit 1278000 Average assets 3375000 ROI= 1278000/3375000*100 = 37.87%
b) Revenue =4680000+1350000= 6030000 COGS = 2934000+1026000= 3960000 Operating Expenses= 468000+153000= 621000 Operating Profit= 1449000
Average Assets= 3375000+990000= 4365000 ROI= 1449000/4365000*100= 33.20%
c) Revenue 6030000 COGS = 3960000+121500= 4081500 Operating Expenses 621000 Operation Profit 1327500
Average Assets= 3375000 ROI= 1327500/3375000*100 =39.33%
d)Manager would prefer the case where he elected to take the floor plan option i.e. ROI 39.33%
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