Given the SPM model above, please answer the following questions:

Project A use lean strategy which leads to a decrease in the cost of goods sold (COGS) by 10% and direct expenses by 5%.

Project B use innovation strategy which results in a projected sales increase of 15%. Ignoring the investments required (assuming they are identical for both projects), use the strategic profit model shown in Figure 11.1 to analyze how these projects would impact the firms ROA.

Based on your analysis which project would you recommend and why? Please show necessary calculations to support your recommendations.

Team Activity-Your Firm's ROA Sales Revenue $2,000 Gross Profit $500 COGS $1,500 Net Income $100 Transportation Handing Storage Promotion etc Direct Expenses $300 . Profit Margin 5% + Total Expenses $400 Other Expenses $100 Sales Revenue $2,000 Return on Assets 10% Sales Revenue $2,000 Receivables $100 + Inventory $400 + Other Assets $100 Asset Turnover 2 Current Assets $600 + Fixed Assets $400 + Total Assets $1,000