Question
Calculating ROI Use the following information for The Regal Company to compute ROI. Net operating income ($50,000) Average operating assets ($230,000) Sales ($535,000) Operating expenses($485,000)
Calculating ROI Use the following information for The Regal Company to compute ROI.
Net operating income ($50,000)
Average operating assets ($230,000)
Sales ($535,000) Operating expenses($485,000)
Compute Regal's new ROI
1a. Assume that Regal's manager invests in a $30,000 piece of equipment that increases sales by $35,000, while increasing operating expenses by $15,000 and reports the following:
Net operating income ($50,000)
Average operating assets($230,000)
Sales($535,000) Operating expenses ($485,000)
Compute Regals new ROI.
1b. Computing Residual Income - The Retail Division of Zephyr, Inc. has average operating assets of $100,000andisrequiredtoearnareturnof20%ontheseassets. Inthecurrentperiod,thedivision earns $30,000. Compute residual income for the Retail Division.
1c.The Wholesale Division of Zephyr, Inc. has average operating assets of $1,000,000 and is also required to earn a return of 20% on these assets. In the current period, the division earns $220,000. Compute residual income for the Wholesale Division.
1d. Which division is performing better?
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