Serie Incorporated reported the following results from last year's operations: At the beginning of this year, the company has a $2,100,000 investment opportunity with the following characteristics:
If the company pursues the investment opportunity and otherwise performs the same as last year, the combined margin for the entire company will be closest to:
A) 4.9%
B) 4.3%
C) 0.9%
D) 3.5%

Question

Serie Incorporated reported the following results from last year's operations:  At the beginning of this year, the company has a $2,100,000 investment opportunity with the following characteristics:
 If the company pursues the investment opportunity and otherwise performs the same as last year, the combined margin for the entire company will be closest to:
A) 4.9% 
B) 4.3% 
C) 0.9% 
D) 3.5%

Quizplus · Accepted Answer

To calculate the combined margin for the entire company after pursuing the investment opportunity, we need to add the margin generated from the investment opportunity to the margin generated from last year's operations.

Margin = Operating Income / Revenue

Margin from last year's operations = $186.4 million / $4,020 million = 4.63%

Margin from investment opportunity = ($2,100,000 * 0.22) / $30,000,000 = 1.54%

Combined margin = (186.4 + 2.1*0.22) / (4,020 + 30) = 4.31%

The combined margin for the entire company will be closest to 4.3% (option B).

Serie Incorporated Reported the Following Results from Last Year's Operations