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Exercise $13-33$ Improving ROI $($LO $13-2,13-3)$

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$[$The following information applies to the questions displayed below.$]$

The following data pertain to British Isles Aggregates Company, a producer of sand, gravel, and cement, for the year just ended.

Sales revenue $6,700,000\mathrm{.}00$

cost of goods sold $2,368,000\mathrm{.}00$

operating expenses $3,796,000\mathrm{.}00$

average invested capital $1,675,000\mathrm{.}00$

$$ denotes the British pound sterling, the national monetary unit of Great Britain.

part $1$

compute the company's sales margin, capital turnover and ROI

sales margin $\%$

capital turnover

ROI $\%$

part $2$

If the sales and average invested capital remain the same during the next year, to what level would total expenses have to be reduced in order to improve the firm$$s ROI to $35$ percent?

total expenses must be reduced to

part $3$

$3-$a$.$ Assuming that the expenses and cost of goods sold are reduced in order to improve the firm's ROI to $35$ percent, compute the firm's new sales margin.

$3-$b$.$ Show how the new sales margin and the old capital turnover together result in a new ROI of $35$ percent.

$3$A

Assuming that the expenses and cost of goods sold are reduced in order to improve the firm's ROI to $35$ percent, compute the firm's new sales margin. $($Round your answers to $2$ decimal places $($i$.$e$.,\mathrm{.}1234$ should be entered as $12\mathrm{.}34).)$

new sales margin $\%$

$3$B

Show how the new sales margin and the old capital turnover together result in a new ROI of $35$ percent. $($Enter "new sales margin" as a percentage rounded to $2$ decimal places $($i$.$e$.,\mathrm{.}1234$ should be entered as $12\mathrm{.}34)$ and "old capital turnover" to two decimal places.$)$

NEW ROI $=\%$ x $(=)35\%$