Chux Industries manufactures a variety of household products. Roy Rogers, head of

the company's Hardware Division has just completed a miserable nine months. "If it

could have gone wrong, it did. Sales are down, income is down, inventories are

bloated, and quite frankly, I'm beginning to worry about my job," he moaned. Rogers

is evaluated on the basis of ROI. Selected figures for the Hardware Division for the

past nine months follow.

Sales revenue....................................... $7,200,000

Net profit ............................... $ 540,000

Total assets................................. $9,000,000

In an effort to do something positive and to salvage the current year's performance, Rogers was planning to acquire two competitors having the following financial characteristics:

Projected Sales Projected Operating Expenses Projected Invested Capital

Anderson Manufacturing $4,500,000 $3,600,000 $7,500,000

Palm Beach Enterprises 6,750,000 6,180,000 7,125,000

Assuming the company requires a minimum return on investment of 8%. Determine the residual income of the following:

a) Chux Industries before any strategy is implemented

b) Anderson Manufacturing

c) Palm Beach Enterprises

Hi Tutors,

I have calculated Chux RI which is -180000, but I am not confident I did it correctly. Also, I could not use the same formula for the rest of the questions. Can you please help me with these questions? Thank you.