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Apositive esidul income would indicate that a division's ROI was lower than the minimum required rate ofretum for the division. True b. False ROI used
Apositive esidul income would indicate that a division's ROI was lower than the minimum required rate ofretum for the division. True b. False ROI used alone as a performance measure discourages managers from accepting all investment decisions that wil benefit the company as a whole a. True False Questions 3-5 refer to the following: The Upholstery Division at Robinson's Furniture recorded operating data as follows for the past year Sales Gross margin Net operating income Stockholders' equity Average operating assets Minimum required rate of return $300,000 125,000 ct incon 60,000 85,000 500,000 10% ROI X For the past year, the return on investment was: a.10% b. 1890d. 20% 012% %-10%) oz ,0%) . The residual income for the Upholstery Division would be: a. $60,000 IZ-,- 500,000 : 10,000 50.000:20M (12 x e. $50,000 D $10,000d unknown given the limited data available. S.Assume that the Upholstery Division has the opportunity to invest in a project that will cost $100,000 and will yield annual net income of $11,000. Which of the two measures-ROI or Residual Income-would be increased if Jenkins made this investment? a. only ROI would increase b only Residual Income would increase c. both ROI and Residual Income would increase d. neither ROI nor Residual Income would increase
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