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Consider the following data (in millions) from Trident Financial, Inc., which has two main divisions, mortgage loans and consumer loans: Mortgage Loans Consumer Loans Average
Consider the following data (in millions) from Trident Financial, Inc., which has two main divisions, mortgage loans and consumer loans: |
Mortgage Loans | Consumer Loans | |||||
Average total assets | $ | 2,500 | $ | 17,750 | ||
Operating income | $ | 530 | $ | 2,485 | ||
Return on investment (ROI) | 21.20 | % | 14.00 | % | ||
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Required: |
1. | Based on ROI, which division is more successful? |
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2. | Trident uses residual income (RI) as a measure of the financial performance of its divisions. What is the RI for each division if the minimum desired rate of return is: (a) 10%, (b) 15%, and (c) 20%? (Leave no cells blank. Enter "0" wherever required. Do not round intermediate calculations. Negative amounts should be indicated by a minus sign. Enter your answers in millions, rounded to nearest whole number.) |
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