10.3

Orange Corp. has two divisions: Fruit and Flower. The following information for the past year is available for each divisio

Sales revenue Cost of goods sold and operating expenses Net operating income Average invested assets Fruit Division 780,000 585,000 195,000 1,950,000 Flower Division $ 1,170,000 877,500 $ 292,500 $ 1.625,000 $ $ Orange has established a hurdle rate of 6 percent. Required: 1-a. Compute each division's return on investment (ROI) and residual income for last year. (Enter your ROI answers as a percentage rounded to two decimal places, (.e., 0.1234 should be entered as 12.34%.)) Fruit Division Flower Division ROI Residual Income (Loss) 1-b. Determine which manager seems to be performing better. Flower Division Fruit Division 2. Suppose Orange is investing in new technology that will increase each division's operating income by $124,000. The total investment required is $1,700,000, which will be split evenly between the two divisions. Calculate the ROI and return on investment for each division after the investment is made. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.)) Fruit Division Flower Division ROI Residual Income (Loss) 3. Which manager will accept the investment. Fruit Division Manager Flower Division Manager