Question

Required information (The following information applies to the questions displayed below.] Westerville Company reported the following results from last year's operations: Sales Variable expenses Contribution margin Fixed expenses Net operating income Average operating assets $2,200,000 660,000 1,540,000 1,100,000 $ 440,000 $1,375,000 At the beginning of this year, the company has a $275,000 investment opportunity with the following cost and revenue characteristics: Sales Contribution margin ratio Fixed expenses $440,000 60% of sales $220,000 The company's minimum required rate of return is 15%. 9. If the company pursues the investment opportunity and otherwise performs the same as last year, what ROI will it earn this year? (Do not round intermediate calculations. Round your percentage answer to 1 decimal place (i.e., 0.1234 should be considered as 12.3).) ROI %

Answer 1

Answer
Calculation of ROI :
return on investment = Net operating income/Average operating assets
	PRESENT	NEW	TOTAL
NET SALES	$      2,200,000	$       440,000	$     2,640,000
NET INCOME	$         440,000	$         44,000	$        484,000
OPERATING ASSETS	$      1,375,000	$       275,000	$     1,650,000
ROI	32%	16%	29.33%