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Saint MbA560 module 8 problem




Question;Problem 15-23 Return on investment;Soto Corporation?s 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.;Required;a. Compute Soto?s profit margin for;2011.;b. Compute Soto?s turnover for;2011.;c. Compute Soto?s return on;investment for 2011.;d. Recompute Soto?s 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;evaluation;Ernest Jones is reviewing his company?s 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 company?s discount rate;for present value computations is 8 percent.;Expected and actual cash flows follow.;Year 1;Year 2;Year 3;Year 4;Year 5;Expected;$3,300,000;$4,920,000;$4,560,000;$4,980,000;$4,200,000;Actual;2,700,000;3,060,000;4,920,000;3,900,000;3,600,000;Required;a. 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#49532 | Written in 18-Jul-2015

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