Question

31) Which of the following will not result in an increase in return on investment (ROI), assuming other factors remain the same? A) A reduction in expenses. B) An increase in net operating income. C) An increase in operating assets. D) An increase in sales. 32) Tennill Inc. has a $1,400,000 investment opportunity with the following characteristics: Sales $ 4,480,000 40 % of sales Contribution margin ratio Fixed expenses S 1,657,600 The ROI for this year's investment opportunity is closest to: A) 8.1% B) 128.0 % C) 3.0% D) 9.6% 33) Pankey Inc. has a $700,000 investment opportunity that would involve sales of $1,050,000, a contribution margin ratio of 40% of sales, and fixed expenses of $325,500. The company's minimum required rate of return is 18%. The residual income for this year's investment opportunity is closest to: A) ($31,500) B) $0 C) $94,500 D) $126,000

Answer 1

3 © An increase in operating assets Explanations All other ophons except ② will result in an increase & return on Investment (ROI) assuring other fachon remains the same (3) Ophon D ROI - Magn & twin over margin = Net operating Income Average opuabing avet, = $1792.000 $ 1657600 Contribution margin ( 40% *4,480,000) Fixed expenses Net operating in come $134,400 IUD 6/3440 Rol - Niet operating Sirene Average operating assets 534400 $1400,000 = 9.6% $420,000 (3) Ophon A contribuhon margin (40% * $ 1050000) ... 325 50 $ 44500 freed expenses Niet operahng Imorne Average operahng assets Net operating Income $7,09000 994,500 126,000 A. B. Minimum required rehun ($7,00,000 x 18%) 53),560 (AB) Residual Drome