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Question & Answer: Eastevan Company calculated its return on investment as 10 percent. Sales are now $300,000, and the amount of total op…..

Eastevan Company calculated its return on investment as 10 percent. Sales are now $300,000, and the amount of total operating assets is $320,000. Required a. If expenses are reduced by $28,000 and sales remain unchanged, what return on investment will result? (Round your answer to 2 decimal places. (i.e., .2345 should be entered as 23.45).) b. If both sales and expenses cannot be changed, what change in the amount of operating assets is required to achieve the same result? (Do not round intermediate calculations. Round your final answer to the nearest whole dollar.) Answer is complete but not entirely correct. a.Return on investment 18.75。1% Operating assets must decrease ebyS 170,667

Eastevan Company calculated its return on investment as 10 percent. Sales are now $300,000, and the amount of total operating assets is $320,000. Required a. If expenses are reduced by $28,000 and sales remain unchanged, what return on investment will result? (Round your answer to 2 decimal places. (i.e., 2345 should be entered as 23.45).) b. If both sales and expenses cannot be changed, what change in the amount of operating assets is required to achieve the same result? (Do not round intermediate calculations. Round your final answer to the nearest whole dollar.)

Expert Answer

 

a. Return on Investment 18.75 %
b. Operating assets must decrease by $ 149,333

Operating assets that would result in ROI of 18.75% with net income of $ 32,000 = $ 32,000 / 18.75% = $ 170,667

Change needed in operating assets = $ 320,000 – $ 170,667 = $ 149,333

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