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What will be the overall roi be this year

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Question - &Pizza is a regional fast casual pizza restaurant chain. &Pizza reports the following results from last year's operations. The manager of &Pizza, who have the authority to make investments as needed are evaluated based on ROI.

Sales $11,600,000

Variable expenses 7,380,000

Contribution margin 4,220,000

Fixed expenses 3,516,000

Net operating income $704,000

Average operating assets $6,000,000

At the beginning of this year, the DC-area manager is considering a $800,000 investment opportunity for a new outlet with the following characteristics:

Sales $560,000

Contribution margin ratio 50% of sales

Fixed expenses $254,400

Required -

1. What was last year's return on investment (ROI) for &Pizza?

2. What is the ROI for the new investment opportunity by itself?

3. If &Pizza pursues the investment opportunity and otherwise performs the same as last year, what will be the overall ROI be this year?

4. If you were the manager for DC-area &Pizza operations would accept or reject the new investment opportunity? Why?

Reference no: EM133180459

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