Tennill Inc. has a $1,400,000 investment opportunity with the following characteristics: $\begin{array}{lc}
\text { Sales } & \$ 4,480,000 \
\text { Contribution margin ratio } & 40 \% \text { of sales } \
\text { Fixed expenses } & \$ 1,657,600
\end{array}$ The ROI for this year's investment opportunity considered alone is closest to:

Question

Quizplus · Accepted Answer

To calculate the ROI (Return on Investment), we first need to determine the net operating income (NOI). The contribution margin ratio is 40% of sales, so the contribution margin is 40% of $4,480,000 = $1,792,000. Subtracting the fixed expenses of $1,657,600 from the contribution margin gives us the NOI: $1,792,000 - $1,657,600 = $134,400. The investment is $1,400,000, so the ROI is ($134,400 / $1,400,000) * 100 = 9.6%.

Tennill Inc The ROI for This Year's Investment Opportunity Considered Alone Is