Criner Incorporated reported the following results from last year's operations:
At the beginning of this year, the company has a $1,800,000 investment opportunity with the following characteristics:
Required:
1.What was last year's return on investment (ROI)? (Round to the nearest 0.1%.)
2. If the company pursues the investment opportunity and otherwise performs the same as last year, what will be the overall return on investment will this year? (Round to the nearest 0.1%.)

Question

Criner Incorporated reported the following results from last year's operations:

At the beginning of this year, the company has a $1,800,000 investment opportunity with the following characteristics:

Required:
1.What was last year's return on investment (ROI)? (Round to the nearest 0.1%.)
2. If the company pursues the investment opportunity and otherwise performs the same as last year, what will be the overall return on investment will this year? (Round to the nearest 0.1%.)

Nicole Metzler · Accepted Answer

Final Answer :

1. Last year's Return on investment = Net operating income ÷ Average operating assets = $644,000 ÷ $7,000,000 = 9.2%
2. If the company pursues the investment opportunity and otherwise performs the same as last year, the return on investment will be:

Net operating income = $644,000 + $118,800 = $762,800
Average operating assets = $7,000,000 + $1,800,000 = $8,800,000
Return on investment = Net operating income ÷ Average operating assets = $762,800 ÷ $8,800,000 = 8.7%

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