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can you help me undertand this concept? Thank you!! Required: 1-a. Calculate the return on investment (ROI) for 201 for the Fairmont Division. 1-b. Calculate
can you help me undertand this concept? Thank you!!
Required: 1-a. Calculate the return on investment (ROI) for 201 for the Fairmont Division. 1-b. Calculate residual income for 201 for the Fairmont Division. Complete this question by entering your answers in the tabs below. Calculate the return on investment (ROI) for 201 for the Fairmont Division. Required: 1-a. Calculate the return on investment (ROI) for 201 for the Fairmont Di 1-b. Calculate residual income for 201 for the Fairmont Division. Complete this question by entering your answers in the tabs below Calculate residual income for 201 for the Fairmont Division. Note: Enter your answer in dollars and not in thousands. Wyalusing Industries has manufactured prefabricated houses for over 20 years. The houses are constructed in sections to be assembled on customers' lots. Wyalusing expanded into the precut housing market when it acquired Fairmont Company, one of its suppliers. In this market, various types of lumber are precut into the appropriate lengths, banded into packages, and shipped to customers' lots for assembly. Wyalusing designated the Fairmont Division as an investment center. Wyalusing uses return on investment (ROI) as a performance measure, with investment defined as average productive assets. Management bonuses are based in part on ROI. All investments are expected to earn a minimum return of 12 percent before income taxes. Fairmont's ROI has ranged from 24.5 to 27.7 percent since it was acquired. Fairmont had an investment opportunity in 201 that had an estimated ROI of 23 percent. Fairmont's management decided against the investment because it believed the investment would decrease the division's overall ROI. The 20x1 income statement for Fairmont Division follows. The division's productive assets were $16,800,000 at the end of 201, a 5 percent increase over the balance at the beginning of the year. Required: 1-a. Calculate the return on investment (ROI) for 201 for the Fairmont Division. 1.b. Calculate residual income for 201 for the Fairmont Division. Complete this question by entering your answers in the tabs below Step by Step Solution
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