Question
Allenby Company has operating assets of $19,500,000. The companys operating income for the most recent accounting period was $2,600,000. The Fisher Division of Allenby controls
Allenby Company has operating assets of $19,500,000. The companys operating income for the most recent accounting period was $2,600,000. The Fisher Division of Allenby controls $8,260,000 of the companys assets and earned $1,210,000 of its operating income. Allenbys desired ROI is 9 percent. Allenby has $870,000 of additional funds to invest. The manager of the Fisher division believes that his division could earn $130,000 on the additional funds. The highest investment opportunity to any of the companys other divisions is 10 percent.
Required: | |
a. | Calculate the ROI of Fisher Division. (Round your answers to 2 decimal places. Omit the "%" sign in your response.) |
(1) | Before investment opportunity. |
(2) | Only on the new investment opportunity. |
(3) | Fisher total ROI if investment opportunity is accepted. |
ROI | |
(1) | % |
(2) | % |
(3) | % |
c-1. | Calculate Fishers residual income from the new investment opportunity. (Omit the "$" sign in your response.) |
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started