The Records for the Venusian Division Show the Following Data $$\begin{array} { l l } \text { Asset base } & \$ 500,000 \\\text { Sales Revenues } & \$ 725,000 \\\text { Expenses } & \$ 662,500\end{array}$$

question 111

Essay

The records for the Venusian Division show the following data: $$\begin{array} { l l } \text { Asset base } & \$ 500,000 \\\text { Sales Revenues } & \$ 725,000 \\\text { Expenses } & \$ 662,500\end{array}$$
Required:
a.What is the margin, turnover, and ROI for Venusian Division?
b.Venusian has an option to make an additional investment that would add $100,000 to the asset base. It would generate an additional $50,000 in sales revenue and no additional expenses. What would be the effect on margin, turnover, and ROI?
c.Another alternative (independent of alternative 'b') for Venusian is to run an advertising campaign that would require additional advertising expenses of $37,500, but the best estimate is the campaign would generate an additional $75,000 of revenue. What would be the effect on margin, turnover, and ROI?

---

Definitions:

Annual Cost Savings

The reduction in costs realized over a year, from actions such as process improvement or cost-cutting measures.

Discount Rate

The interest rate used in discounted cash flow (DCF) analysis to determine the present value of future cash flows or to assess the attractiveness of an investment.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life in equal annual amounts.

Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows over a period of time, used in capital budgeting to assess the profitability of an investment.