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Assume that sales are expected to increase by 5% next year, core profit margin is expected to be 12% of sales, and current NOA is expected to grow at...

Assume that sales are expected to increase by 5% next year, core profit margin is expected to be 12% of sales, and current NOA is expected to grow at the same growth rate of sales. If the required return on operations is 8%, current sales are $854,345, current NOA is $252,710, what is the expected ReOI for the coming year?


Answer is 87,430.67, just wondering on a solution.

Top Answer

Expected ReOI = Expected Earnings - (NOA of previous year x cost of capital) Required rate of return = cost of capital = 8%... View the full answer

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