Saint leo MBA560 module 8 homework

$21.00

Description

Problem
15-23 Return on investment

Soto Corporation’s balance sheet indicates
that the company has $300,000 invested in operating assets. During 2011, Soto earned operating income of
$45,000 on $600,000 of sales.

Required

a. Compute Soto’s
profit margin for 2011.

b. Compute Soto’s
turnover for 2011.

c. Compute Soto’s
return on investment for 2011.

d. Recompute
Soto’s ROI under each of the following independent assumptions.

(1) Sales increase for $600,000 to $750,000,
thereby resulting in an increase in

operating income for $45,000 to
$60,000.

(2) Sales remain constant, but Soto reduces
expenses resulting in an increase in

operating income from $45,000 to
$48,000.

(3) Soto is able to reduce its invested
capital from $300,000 to $240,000 without

affecting operating income.

Problem 16-23 Postaudit
evaluation

Ernest Jones is reviewing his company’s
investment in a cement plant. The
company paid $15,000,000 five years ago to acquire the plant. Now top management is considering an
opportunity to sell it. The president
wants to know whether the plant has met original expectations before he decides
its fate. The company’s discount rate
for present value computations is 8 percent.
Expected and actual cash flows follow.

Year 1

Year 2

Year 3

Year 4

Year 5

Expected

$3,300,000

$4,920,000

$4,560,000

$4,980,000

$4,200,000

Actual

2,700,000

3,060,000

4,920,000

3,900,000

3,600,000

Required

a. Compute the net present value of the
expected cash flows as of the beginning of the

investment.

b. Compute the net present value of the
actual cash flows as of the beginning of the

investment.

c. What do you conclude from this
postaudit?

Reviews

There are no reviews yet.

Be the first to review “Saint leo MBA560 module 8 homework”

Your email address will not be published. Required fields are marked *