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ACC Module 8 Problem 15-23 and 16-23

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Question;Problem 15-23 Return on investmentSoto Corporations balance sheet indicates that the company has $300,000 invested in operating assets. During 2011, Soto earned operating income of $45,000 on $600,000 of sales.Requireda. Compute Sotos profit margin for 2011.b. Compute Sotos turnover for 2011.c. Compute Sotos return on investment for 2011.d. Recompute Sotos ROI under each of the following independent assumptions.(1) Sales increase for $600,000 to $750,000, thereby resulting in an increase in operating income for $45,000 to $60,000.(2) Sales remain constant, but Soto reduces expenses resulting in an increase in operating income from $45,000 to $48,000.(3) Soto is able to reduce its invested capital from $300,000 to $240,000 without affecting operating income.Problem 16-23 Postaudit evaluationErnest Jones is reviewing his companys investment in a cement plant. The company paid $15,000,000 five years ago to acquire the plant. Now top management is considering an opportunity to sell it. The president wants to know whether the plant has met original expectations before he decides its fate. The companys discount rate for present value computations is 8 percent. Expected and actual cash flows follow.ExpectedActualYear 1$3,300,0002,700,000Year 2$4,920,0003,060,000Year 3$4,560,0004,920,000Year 4$4,980,0003,900,000Year 5$4,200,0003,600,000Requireda. Compute the net present value of the expected cash flows as of the beginning of the investment.b. Compute the net present value of the actual cash flows as of the beginning of the investment.c. What do you conclude from this postaudit?

 

Paper#38509 | Written in 18-Jul-2015

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