Question
Coolbrook Company has the following information available for the past year: River Division Stream Division Sales revenue $ 1,215,000 $ 1,806,000 Cost of goods sold
Coolbrook Company has the following information available for the past year: River Division Stream Division Sales revenue $ 1,215,000 $ 1,806,000 Cost of goods sold and operating expenses 889,000 1,283,000 Net operating income $ 326,000 $ 523,000 Average invested assets $ 1,070,000 $ 1,480,000 The companys hurdle rate is 6.26 percent. 1. Calculate return on investment (ROI) and residual income for each division for last year. (Do not round your intermediate calculations. Round "ROI" answers to 2 decimal places.) 2. Recalculate ROI and residual income for each division for each independent situation that follows: a. Operating income increases by 10 percent. (Do not round your intermediate calculations. Round "ROI" answers to 2 decimal places.) b. Operating income decreases by 11 percent. (Do not round your intermediate calculations. Round "ROI" answers to 2 decimal places.) c. The company invests $247,000 in each division, an amount that generates $106,000 additional income per division. (Do not round your intermediate calculations. Round "ROI" answers to 2 decimal places.) d. Coolbrook changes its hurdle rate to 4.26 percent. (Do not round your intermediate calculations. Round "ROI" answers to 2 decimal places.)
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