Westerville Company reported the following results from last year’s operations:
Sales$2,300,000 Variable expenses 670,000 Contribution margin 1,630,000 Fixed expenses 1,170,000 Net operating income$ 460,000 Average operating assets$1,437,500
This year, the company has a $287,500 investment opportunity with the following cost and revenue characteristics:
Sales$460,000 Contribution margin ratio 50 % of sales Fixed expenses$161,000 The company’s minimum required rate of return is 15%.
If the company pursues the investment opportunity and otherwise performs the same as last year, what margin will it earn this year?