Chapter 9: Exercise E9.9 E9-9 Optix International is considering a significant e
ID: 2434177 • Letter: C
Question
Chapter 9: Exercise E9.9E9-9 Optix International is considering a significant expansiontoits product line. The sales force is excited abouttheopportunities that the new products will bring. The newproductsare a significant step up in quality above the company'scurrentofferings, but offer a complementary fit to its existingproductline. Frank Renolds, senior production department manager,is veryexcited about the high-tech new equipment that will have tobeacquired to produce the new products. Carol Fischer, thecompany'sCFO, has provided the following projections based onresults withand without the new products.
Without New Products With New Products
Sales $10,000,000 $18,000,000
Net income $800,000 $1,800,000
Average total assets $5,000,000 $15,000,000
Instructions
(a) Compute the company's return on assets ratio, profitmarginratio, and asset turnover ratio, both with and without thenewproduct line.
(b) Discuss the implications that your findings in part (a) haveforthe company's decision.