Assignment: Effects of Changes in Sales, Expenses, and Assets on ROI
BusServ.com Corporation provides business-to-business services on the Internet. Data concerning the most recent year appear below:
Sales $7,900,000
Net operating income $780,000
Average operating assets $2,500,000
Consider each of the following requirements independently.
Requirement 1:
Compute the company's return on investment (ROI).
Requirement 2:
The entrepreneur who founded the company is convinced that sales will increase next year by 130% and that net operating income will increase by 420%, with no increase in average operating assets. What would be the company's ROI?
Requirement 3:
The Chief Financial Officer of the company believes a more realistic scenario would be a $2 million increase in sales, requiring an $780,000 increase in average operating assets, with a resulting $190,000 increase in net operating income. What would be the company's ROI in this scenario?