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:
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%

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%

Dylan Martinez · Accepted Answer

Final Answer : C, Explanation :  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 = $14,000,000Total expenses = $11,500,000 + $500,000 = $12,000,000Margin = (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 = $14,900,000New expenses = $12,000,000 + $900,000 = $12,900,000New 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%.

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