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Coolbrook Company has the following information available for the past year: River Division Stream Division Sales revenue $ 1,211,000 $ 1,813,000 Cost of goods sold

Coolbrook Company has the following information available for the past year:

River Division Stream Division
Sales revenue $ 1,211,000 $ 1,813,000
Cost of goods sold and operating expenses 883,000 1,300,000
Net operating income $ 328,000 $ 513,000
Average invested assets $ 1,090,000 $ 1,590,000

The companys hurdle rate is 6.51 percent.

Required:

1. Calculate return on investment (ROI) and residual income for each division for last year.

2. Recalculate ROI and residual income for the division for each independent situation that follows:

a. Operating income increases by 9 percent.

b. Operating income decreases by 11 percent.

c. The company invests $251,000 in each division, an amount that generates $103,000 additional income per division.

d. Coolbrook changes its hurdle rate to 4.51 percent.

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