Geoff’s Electronic Store has been in business for several years. The firm’s owners have described the store as a “high-price, high service” operation that provides lots of assistance to its customers Margin has averaged a relatively high 30% per year for several years, but turnover has been a relatively low 02 based on average total assets of $1,200,000. A discount Electronic Store is about to open in the area served by Geoff’s, and management is considering lowering prices to compete effectively. Required: a. Calculate current sales and ROI for Geoff’s Electronic Store. (Round your “ROI” to 1 decimal place.(e.g., 32.1)) b. Assuming that the new strategy would reduce margin to 20%, and assuming that average total assets would stay the same, calculate the sales that would be required to have the same ROI as Geoff’s currently earns. (Do not round your intermediate calculations.) c. Suppose you presented the results of your analysis in parts a and b of this problem to Geoff’s, and he replied, “What are you telling me? If I reduce my prices as planned, then i have to practically double my sales volume to earn the same return?” Given the results of your analysis, what is the actual amount of increase in sales required? (Do not round your intermediate calculations.)
