HOME Y Delete Column Imert Column font Name Font Sie Tab Stop 2 Wine Text KO Conditional Formatting 9 Remove Conditional Fo 3. Insert Row - Delete Row Merge Cell B Copy CUCK HERE TO SAVE YOUR WORK M K N N H A D G 1 bxtreMel Rtness Inc. is a health club. The following results were recorded for last year: 2 3 Sales $4,000,000 Operating Income $300,000 5 Asset Turnover 2 6 7 Required: 8 a) Calculate the company's ROI for the past year using margin and turnover. (2 marks) 9 10 Margin Turnover Return on investment 12 13 14 b) Assume the minimum required rate of return on average operating assets is 14%. Calculate the club's Residual Income. (3 marks) 15 16 17 18 Residual income 19 0 The owner is reviewing growth plans for the business. It is estimated that opening a second health club would increase Total Sales from $4,000,000 to $4,500,000 and Total Operating Income from $300,000 to $360,000, but also increase average operating assets by $380,000. 20 Calculate the revised ROI for the total company assuming a 2nd health club is opened. If the expansion decision is based on ROI, will the second club be opened? Explain why. (6 marks) 21 22 23 24 25 26 Decision KAIROIRI V6 New HD 1080) ace z yu OO S 8 19 17 . CP 2 7 ? & + 2 3 E % 5 6 7 1 8 2 9 3 e a E R - T Y U S D F G H J Z X C V B N M