Explore BrainMass

Explore BrainMass

    Compute ROI scenarios

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    See attached file.

    Saba Signs Company has provided the following data:

    Required:
    a) Determine ROI before the additional investment.
    b) Determine ROI of the additional investment.
    c) Determine ROI after the additional investment.
    d) Will the manager accept the additional investment using ROI? Why or why not?
    e) If Saba wants to increase ROI to 10% but cannot change the current profit level and sales amount, what options does he have? Show your computations.
    f) If Saba wants to increase ROI to 10% but cannot change sales or investment, what must the profit become?
    g) If Saba wants to increase ROI to 10% given the same level of investment and profit, what must sales become, assuming that the margin on incremental sales is 20%.

    © BrainMass Inc. brainmass.com June 3, 2020, 11:34 pm ad1c9bdddf
    https://brainmass.com/business/accounting/saba-signs-co-compute-roi-scenarios-286054

    Attachments

    Solution Preview

    Item End of the year Amount Proposed addition
    Sales $2,400,000 600,000
    Investment $4,800,000 !,800,000
    Profit $384,000 $108,000

    a) Determine ROI before the additional investment.

    ROI = Profit/Investment = 384,000/4,800,000 = 8%

    b) Determine ROI of the additional investment.

    ROI = Profit/Investment = 108,000/1,800,000 = 6%

    c) Determine ROI after the additional investment.

    After the investment, the profit will be added and the investment will be added
    ROI = ...

    Solution Summary

    The solution explains how to calculate the ROI for different scenarios.

    $2.19

    ADVERTISEMENT