Westerville Company reported the following results from last year's operations:
|
| Sales |
$ |
1,300,000 |
| Variable expenses |
|
440,000 |
|
|
|
| Contribution margin |
|
860,000 |
| Fixed expenses |
|
600,000 |
|
|
|
| Net operating income |
$ |
260,000 |
|
|
|
| Average operating assets |
$ |
812,500 |
|
|
|
|
|
This year the company has a $162,500 investment opportunity with the following cost and revenue characteristics:
|
|
| Sales |
$ |
260,000 |
|
| Contribution margin ratio |
|
80 |
% of sales |
| Fixed expenses |
$ |
182,000 |
|
|
|
| The company's minimum required rate of return is 15%. |
|
If the company pursues the investment opportunity and otherwise performs the same as last year, what ROI will it earn this year?