Kaler Company has sales of $1,450,000, cost of goods sold of $795,000, other operating expenses of...

Kaler Company has sales of $1,450,000, cost of goods sold of $795,000, other operating expenses of $208,000, average invested assets of $4,600,000, and a hurdle rate of 12 percent.

Required:
1. Determine Kaler’s return on investment (ROI), investment turnover, profit margin, and residual income.
2. Several possible changes that Kaler could face in the upcoming year follow. Determine each scenario’s impact on Kaler’s ROI and residual income. (Note: Treat each scenario independently.)
a. Company sales and cost of goods sold increase by 15 percent.
b. Operating expenses increase by $85,000.
c. Operating expenses decrease by 10 percent.
d. Average invested assets decrease by $405,000.
e. Kaler changes its hurdle rate to 9 percent.

Determine Kaler’s return on investment (ROI), investment turnover, profit margin, and residual income. (Do not round your intermediate calculations. Enter your ROI and Profit Margin answers to 2 decimal places (i.e., 0.1234 should be entered as 12.34%). Round your Investment Turnover answer to 4 decimal places.)


Return on Investment		%
Investment Turnover
Profit Margin		%
Residual Income (Loss)

Req 2a

Several possible changes that Kaler could face in the upcoming year follow. Determine each scenario’s impact on Kaler’s ROI and residual income. (Note: Treat each scenario independently.) Company sales and cost of goods sold increase by 15 percent. (Enter your ROI percentage answer to 2 decimal places, (i.e., 0.1234 should be entered as 12.34%.))


Return on Investment		%
Residual Income (Loss)

Req 2B

Several possible changes that Kaler could face in the upcoming year follow. Determine each scenario’s impact on Kaler’s ROI and residual income. (Note: Treat each scenario independently.) Operating expenses increase by $85,000. (Enter your ROI percentage answer to 2 decimal places, (i.e., 0.1234 should be entered as 12.34%.))


Return on Investment		%
Residual Income (Loss)

Req 2C

Several possible changes that Kaler could face in the upcoming year follow. Determine each scenario’s impact on Kaler’s ROI and residual income. (Note: Treat each scenario independently.) Operating expenses decrease by 10 percent. (Enter your ROI percentage answer to 2 decimal places, (i.e., 0.1234 should be entered as 12.34%.))


Return on Investment		%
Residual Income (Loss)

Req 2D

Several possible changes that Kaler could face in the upcoming year follow. Determine each scenario’s impact on Kaler’s ROI and residual income. (Note: Treat each scenario independently.) Average invested assets decrease by $405,000. (Enter your ROI percentage answer to 2 decimal places, (i.e., 0.1234 should be entered as 12.34%.))


Return on Investment		%
Residual Income (Loss)

Req 2E

Several possible changes that Kaler could face in the upcoming year follow. Determine each scenario’s impact on Kaler’s ROI and residual income. (Note: Treat each scenario independently.) Kaler changes its hurdle rate to 9 percent. (Enter your ROI percentage answer to 2 decimal places, (i.e., 0.1234 should be entered as 12.34%.))


Return on Investment		%
Residual Income (Loss)

Solutions

Expert Solution

ekkarill92 answered 1 year ago

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