Concept explainers
Investments Things have not been going too well here at Accurate Accounting, Inc. since we hired Todd Smiley. He has a tendency to lose important documents, especially around April, when tax returns of our business clients are due. Today Smiley accidentally shredded Colossal Conglomerate Corp’s investment records. We must therefore reconstruct them on the basis of the information he can gather. Todd recalls that the company earned an $8 million return on investments totaling $65 million last year. After a few frantic telephone calls to sources in Colossal, he learned that Colossal bad made investments in four companies last year: X, Y, Z, and W. (For reasons of confidentiality we are withholding their names.) Investments in company X earned 15% last year, investments in Y depreciated by 20% last year, investments in Z neither appreciated nor depreciated last year, while investments in W earned 20% last year. Smiley was also told that Colossal invested twice as much in company X as in company Z, and three times as much in company W as in company Z. Does Smiley have sufficient information to piece together Colossal’s investment portfolio before its tax return is due next week? If so, what does the investment portfolio look like?
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