Problem $2-4($Algo$)$

As the operations manager for Valley Kayaks $($as described in the previous problem$),$ you find yourself faced with an interesting

situation. Marketing has informed you that they have lost a number of sales because of a lack of inventory. Kayaks, being seasonal in

nature, have to be in stock at your dealers if they are to be sold $($customers are not willing to wait$).$ The director of marketing proposes

that you increase inventories by $20$ percent $($a major investment to you$).$ She has also given the information in the following table. Use

Figure $2\mathrm{.}3.$

CategoryCurrent ValuesProposed Impact of Inventory IncreaseSales$ $4,270,00020\%+$ improvementCost of goods sold$ $3,050,0000\%$Variable expenses$ $610,00010\%$ reductionFixed expenses$ $213,50015\%+$ increaseInventory$ $528,00020\%+$ increaseAccounts receivable$ $192,0000\%$Other current assets$ $780,0000\%$Fixed assets$ $450,0000\%$

a$.$ Using the information given, complete the following table and calculate the ROA for current values and new values.

b$.$ Would the projected change in ROA justify the inventory investment?

Required A

Using the information given, complete the following table and calculate the ROA for current values and new values.

Note: Round "ROA" to $2$ decimal places.

Would the projected change in ROA justify the inventory investment?