Minar Incorporated reported the following results from last year's operations: At the beginning of this year, the company has a $900,000 investment opportunity with the following characteristics:
If the company pursues the investment opportunity and otherwise performs the same as last year, the combined margin for the entire company will be closest to:
A) 9.9%
B) 1.9%
C) 7.8%
D) 6.3%

Question

Minar Incorporated reported the following results from last year's operations:  At the beginning of this year, the company has a $900,000 investment opportunity with the following characteristics:
 If the company pursues the investment opportunity and otherwise performs the same as last year, the combined margin for the entire company will be closest to:
A) 9.9% 
B) 1.9% 
C) 7.8% 
D) 6.3%

Quizplus · Accepted Answer

To solve this problem, we need to calculate the new margin that will result from pursuing the investment opportunity.

First, we need to calculate the current total revenue and total expenses:

Total revenue = $12,500,000 + $1,500,000 = $14,000,000

Total expenses = $11,500,000 + $500,000 = $12,000,000

Margin = (Total revenue - Total expenses) / Total revenue * 100% 
Margin = ($14,000,000 - $12,000,000) / $14,000,000 * 100% 
Margin = 14.3%

Now, we can calculate the impact of the investment opportunity:

New revenue = $14,000,000 + $900,000 = $14,900,000

New expenses = $12,000,000 + $900,000 = $12,900,000

New margin = (New revenue - New expenses) / New revenue * 100% 
New margin = ($14,900,000 - $12,900,000) / $14,900,000 * 100% 
New margin = 13.4%

Therefore, the combined margin for the entire company will be closest to 13.4%, which is closest to answer choice C) 7.8%.

Minar Incorporated Reported the Following Results from Last Year's Operations