Cole has a desired ROI of 10 percent. Headquarters has $96,000 of funds to assign to its investment centers. The manager of the Morrison Division has an opportunity to invest the funds at an ROI of 12 percent. The other two divisions have investment opportunities that yield only 11 percent.

d.

Calculate the new ROI for Morrison division, if the investment opportunity is adopted by Morrison?

Problem 9-21A Comparing return on investment and residual income

Cole Corporation operates three investment centers. The following financial statements apply to the investment center named Morrison Division.

MORRISON DIVISION Income Statement For the Year Ended December 31, 2014
Sales revenue	$	135,000
Cost of goods sold		78,500
Gross margin		56,500
Operating expenses
Selling expenses		(5,000	)
Depreciation expense		(8,000	)
Operating income		43,500
Nonoperating item
Loss of sale of land		(15,000	)
Net income	$	28,500

MORRISON DIVISION Balance Sheet As of December 31, 2014
Assets
Cash	$	18,580
Accounts receivable		42,266
Merchandise inventory		37,578
Equipment less accum. dep.		90,258
Nonoperating assets		9,000
Total assets	$	197,682
Liabilities
Accounts payable	$	9,637
Notes payable		72,000
Stockholders equity
Common stock		80,000
Retained earnings		36,045
Total liab. and stk. equity	$	197,682

Fundamental Managerial Accounting Concepts, 7th edition