4. value: 2.00 points Meiji Isetan Corp. of Japan has two regional divisions with headquarters in Osaka and Yokohama. Selected data on the two divisions follow: Sales Division Osaka Yokohama $9,900,000 $ 29,000,000 $ 792.000 $2,900,000 Net operating income Average operating assets $2,475,000 $14,500,000 Required: 1. For each division, compute the return on investment (ROI) in terms of margin and turnover. (Do not round intermediate calculations. Enter your answers as a percent (i.e., 0.12 should be entered as 12).) Osaka % Yokohama % ROI 2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 17%. Compute the residual income for each division. Osaka Yokohama Average operating assets Net operating income Minimum required return on average assets Residual income 3. Is Yokohama's greater amount of residual income an indication that it is better managed? Yes 5. value: 2.00 points Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division A $ 7,100,000 $1,420,000 Sales Average operating assets Net operating income Minimum required rate of return Division B $11,100,000 $2,775,000 $ 1,132,200 40.80% Division C $10,200,000 $ 2,040,000 $ 351,900 22.00% $ 440,200 25.00% Required: 1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. (Round your Turnover answers to 2 decimal places. Round your Margin and ROI percentage answers to 2 decimal places (i.e., 0.1234 should be entered as 12.34).) Margin Turnover ROI Division Division B Division 2. Compute the residual income (loss) for each division. (Loss amounts should be indicated by a minus sign. Round your Required Rate of Return percentage answers to 2 decimal places (i.e., 0.1234 should be entered as 12.34).) Division A Division B Division C % Average operating assets Required rate of return Required operating income Actual operating income Required operating income (above) Residual income (loss) 3. Assume that each division is presented with an investment opportunity that would yield a 27% rate of return. a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity? Division A Division B Division C b. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity? Division A Division B Division C
