Kangaroo Company (KC) is a holding company that owns various businesses. KC is thinking of purchasing an existing grocery store and is choosing amongst three alternatives: a discount grocery store, a grocery store that would compete with chain grocery stores, and a premium grocery store.
Research has gleaned the following information on the three alternatives:
Discount Store |
Conventional Store |
Premium Store |
|
Quarterly Fixed Costs |
$7,500,000 |
$9,500,000 |
$12,500,000 |
Contribution Margin Ratio |
43% |
47% |
55% |
Projected Quarterly Sales |
$19,000,000 |
$22,000,000 |
$24,000,000 |
The initial investment in each facility will be three times quarterly fixed costs. Based solely on financial considerations, which store type would you recommend?
Discount Store |
Conventional Store |
Premium Store |
|
Quarterly Fixed Costs |
|||
Contribution Margin Ratio |
|||
Projected Quarterly Sales |
|||
Breakeven Revenue |
|||
Quarterly Income |
|||
Investment Required |
|||
Return on Investment |
Discount Store | Conventional Store | Premium Store | |
Quarterly Fixed Costs | $7,500,000 | $9,500,000 | $12,500,000 |
Contribution Margin Ratio | 43% | 47% | 55% |
Projected Quarterly Sales | $19,000,000 | $22,000,000 | $24,000,000 |
Break even Revenue | $17,441,860.47 | $20,212,765.96 | $22,727,272.73 |
Quarterly Income | $670,000 | $840,000 | $700,000 |
Investment Required | $22,500,000 | $28,500,000 | $37,500,000 |
ROI | 2.98% | 2.95% | 1.87% |
Hence, conventional store is recommended since highest projected income and Relatively high ROI |
Kangaroo Company (KC) is a holding company that owns various businesses. KC is thinking of purchasing...
CASE 1-5 Financial Statement Ratio Computation Refer to Campbell Soup Company's financial Campbell Soup statements in Appendix A. Required: Compute the following ratios for Year 11. Liquidity ratios: Asset utilization ratios:* a. Current ratio n. Cash turnover b. Acid-test ratio 0. Accounts receivable turnover c. Days to sell inventory p. Inventory turnover d. Collection period 4. Working capital turnover Capital structure and solvency ratios: 1. Fixed assets turnover e. Total debt to total equity s. Total assets turnover f. Long-term...