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Solano Company has sales of $500000 cost of goods sold of $370000 other operating expenses of $50000 average invested assets of $1600000 and a hurdle rate

Solano Company has sales of $500,000, cost of goods sold of $370,000, other operating expenses of $50,000, average invested assets of $1,600,000, and a hurdle rate of 6 percent.Required:1.Determine Solano’s return on investment (ROI), investment turnover, profit margin, and residual income.(Loss amount should be indicated by a minus sign. Do not round your intermediate calculations. Round your “Investment Turnover” answer to 4 decimal places.)2.Several possible changes that Solano could face in the upcoming year follow. Determine each scenario’s impact on Solano’s ROI and residual income. (Note: Treat each scenario independently.)a.Company sales and cost of goods sold increase by 30 percent. (Do not round your intermediate calculations. Round your “Return on Investment” answer to 2 decimal places.)b.Operating expenses decrease by $10,000. (Loss amount should be indicated by a minus sign. Do not round your intermediate calculations. Round your “Return on Investment” answer to 2 decimal places.)c.Operating expenses increase by 20 percent. (Loss amount should be indicated by a minus sign. Do not round your intermediate calculations. Round your “Return on Investment” answer to 2 decimal places.)d.Average invested assets increase by $300,000. (Loss amount should be indicated by a minus sign. Do not round your intermediate calculations. Round your “Return on Investment” answer to 2 decimal places.)e.Solano changes its hurdle rate to 12 percent. (Loss amount should be indicated by a minus sign. Do not round your intermediate calculations. Round your “Return on Investment” answer to 1 decimal place.)

May 23 2020 View more View Less

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