Century Continental Group Incorporated (CCGI) has the following operating segments Mall Residential Commercial Hotels and Convention Centers Segment performance is evaluated based on operating income or loss, and is measured consistently with the operating income or loss in the consolidated financial statement Transfer prices between business segments are set on an arm's length basis for similar transactions with non related parties These transfers are eliminated in the consolidated financial statements Financial data for the business segments of CCGI below Based on the above information compute for the following Return on investment (ROI) of each of the business segment Residual Income Assume that CCGI required a minimum required rate of return of 12 , 20 , 10 and 7 for the Mall, Residential, Commercial, Hotels and Convention Centers respectively, and a business opportunity that would yield a return of 15 is presented to each business unit If performance is measured by ROI which division or divisions will likely accept the opportunity Which division or divisions will reject Why If performance is measured by residual income which division will likely accept the opportunity Which division or divisions will reject Why Mall Residential Consolidated Balances Eliminations 2019 Hotels and Convention Commercial Centers (In Thousands) P4,510,820 P5,046,618 74 100 13,662 P4,584 920 P5,060,280 Revenue External customers Inter segment P45,213,765 P118,311,490 P63,540 287 85 072 P63 625,359 (172,834) (P172,8 34) P45,213,765 P118,311,490 (P1,013 06 1) Segment results Income before income tax Provision for income tax Net income Net income attributable to Equity holders of the Parent Non controlling interests P30,418,637 (7 020 933) P23,397 704 P15,020,332 (2 428,262) P12,592,070 P3,661,683 (658,358) P3 003,325 P1,074,405 (265 768) P808 6 37 P49,161,994 (10 373,321) P38,788,673 (P1 013,063) P22,701,115 696 589 P12,585,587 6,483 P3,003,325 P808,637 (P1,013 063) P38,085,601 703,072 Segment assets P 388,653 151 P217 788,016 P51,340,770 P13,573,854 (P4,076,117) P667,279,674 Segment liabilities P237 486 362 P124,277,871 P5,982 687 P1,092,597 (P4,076,117) P364 763,400 Other information Capital expenditures Depreciation and amortization P29,283 828 9,514,073 P27,578,564 143 438 P10,216 823 560 854 P1,618,631 606,713 P68,697,846 10,825,078

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Sep 15, 2024

Century Continental Group Incorporated (CCGI) has the following operating segments. Mall Residential Commercial Hotels and Convention Centers Segment performance is evaluated based on operating income

Century Continental Group Incorporated (CCGI) has the following operating segments.

Mall
Residential
Commercial
Hotels and Convention Centers

Segment performance is evaluated based on operating income or loss, and is measured consistently with the operating income or loss in the consolidated financial statement. Transfer prices between business segments are set on an arm's length basis for similar transactions with non-related parties. These transfers are eliminated in the consolidated financial statements

Financial data for the business segments of CCGI below.

image text in transcribed

Based on the above information compute for the following:

Return on investment (ROI) of each of the business segment.
Residual Income.
Assume that CCGI required a minimum required rate of return of 12%, 20%, 10% and 7% for the Mall, Residential, Commercial, Hotels and Convention Centers respectively, and a business opportunity that would yield a return of 15% is presented to each business unit.
1. If performance is measured by ROI which division or divisions will likely accept the opportunity? Which division or divisions will reject? Why?
2. If performance is measured by residual income which division will likely accept the opportunity? Which division or divisions will reject? Why?

Mall Residential Consolidated Balances Eliminations 2019 Hotels and Convention Commercial Centers (In Thousands) P4,510,820 P5,046,618 74.100 13,662 P4,584.920 P5,060,280 Revenue: External customers Inter-segment P45,213,765 P118,311,490 P63,540.287 85.072 P63.625,359 (172,834) (P172,8.34) P45,213,765 P118,311,490 (P1,013.06.1) Segment results Income before income tax Provision for income tax Net income Net income attributable to: Equity holders of the Parent Non-controlling interests P30,418,637 (7.020.933) P23,397.704 P15,020,332 (2.428,262) P12,592,070 P3,661,683 (658,358) P3.003,325 P1,074,405 (265.768) P808 6.37 P49,161,994 (10.373,321) P38,788,673 (P1.013,063) P22,701,115 696.589 P12,585,587 6,483 P3,003,325 P808,637 (P1,013.063) P38,085,601 703,072 Segment assets P.388,653.151 P217.788,016 P51,340,770 P13,573,854 (P4,076,117) P667,279,674 Segment liabilities P237.486.362 P124,277,871 P5,982.687 P1,092,597 (P4,076,117) P364.763,400 Other information: Capital expenditures Depreciation and amortization P29,283.828 9,514,073 P27,578,564 143.438 P10,216.823 560.854 P1,618,631 606,713 P68,697,846 10,825,078