1) What is last year's margin? (%)

2) What is last year's turnover? (decimal)

3) What is last year's return on investment? (%)

4) What is the margin related to this years investment opportunity? (%)

5) What is the turnover related to this years investment opportunity? (decimal)

6) What is the ROI related to this years investment opportunity? (%)

7) If the company pursues the investment opportunity and otherwise performs the same as last year, what margin will it earn this year? (%)

8) If the company pursues the investment opportunity and otherwise performs the same as last year, what turnover will it earn this year? (decimal)

9) If the company pursues the investment opportunity and otherwise performs the same as last year, what ROI will it earn this year? (%)

10A) If Westervilles chief executive officer will earn a bonus only if her ROI from this year exceeds her ROI from last year, would she pursue the investment opportunity? (YES OR NO)

10B)

Would the owners of the company want her to pursue the investment opportunity? (YES OR NO)

11) What is last years residual income?

12) What is the residual income of this years investment opportunity?

13) If the company pursues the investment opportunity and otherwise performs the same as last year, what residual income will it earn this year?

14)

If Westervilles chief executive officer will earn a bonus only if her residual income from this year exceeds her residual income from last year, would she pursue the investment opportunity?

15A)

Assume that the contribution margin ratio of the investment opportunity was 65% instead of 70%. If Westervilles Chief Executive Officer will earn a bonus only if her residual income from this year exceeds her residual income from last year, would she pursue the investment opportunity? (YES OR NO)

15B) Would the owners of the company want her to pursue the investment opportunity? (YES OR NO)

16)

17)

IThe following information applies to the questions displayed below. Westerville Company reported the following results from last year's operations: $1,800,000 Sales 435,000 Variable expenses Contribution margin 1,365,000 Fixed expenses 1,005,000 360,000 Net operating income $1,200,000 Average operating assets This year, the company has a $300,000 investment opportunity with the following cost and revenue characteristics: $360,000 Sales 70% of sales Contribution margin ratio 216,000 Fixed expenses The company's minimum required rate of return is 10%