Eliminating the manufacturing operations

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Reference no: EM131765294

Qusetion: Manyops, Inc., is a manufacturing firm that has experienced strong competition in its traditional business. Management is considering joining the trend to the "service economy" by eliminating its manufacturing operations and concentrating on providing specialized maintenance services to other manufacturers. Management of Manyops, Inc., has had a target ROI of 18% on an asset base that has averaged $7 million. To achieve this ROI, average total asset turnover of 2 was required. If the company shifts its operations from manufacturing to providing maintenance services, it is estimated that average total assets will decrease to $4 million.

Assume that the average margin of maintenance service firms is 2.7%, and that the average ROI for such firms is also 16%. Calculate the net income, sales, and total asset turnover that Manyops, Inc., will have if the change to services is made and the firm is able to earn an average margin and achieve an 16% ROI. (Enter your "Sales" and "Net income" answers in millions (i.e., 10,000,000 should be entered as 10). Do not round intermediate calculations. Round your answers to 2 decimal places).

Reference no: EM131765294

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