1.Last year's Margin = Net operating income ÷ Sales = $504,000 ÷ $12,600,000 = 4.0%
2.Last year's Turnover = Sales ÷ Average operating assets = $12,600,000 ÷ $7,000,000 = 1.80
3.Last year's ROI = Net operating income ÷ Average operating assets = $504,000 ÷ $7,000,000 = 7.2% or ROI = Margin × Turnover = 4.0% × 1.80 = 7.2%
4.If the company pursues the investment opportunity and otherwise performs the same as last year, the margin will be:
Net operating income = $504,000 + $33,600 = $537,600
Sales = $12,600,000 + $560,000 = $13,160,000
Margin = Net operating income ÷ Sales = $537,600 ÷ $13,160,000 = 4.1%
5.If the company pursues the investment opportunity and otherwise performs the same as last year, the turnover will be:
Sales = $12,600,000 + $560,000 = $13,160,000
Average operating assets = $7,000,000 + $800,000 = $7,800,000
Turnover = Sales ÷ Average operating assets = $13,160,000 ÷ $7,800,000 = 1.69
6.If the company pursues the investment opportunity and otherwise performs the same as last year, the ROI will be:
ROI = Net operating income ÷ Average operating assets = $537,600 ÷ $7,800,000 = 6.9%
or ROI = Margin × Turnover = 4.1% × 1.69 = 6.9%