Question
Coolbrook Company has the following information available for the past year: Sales revenue River Cost of goods sold and operating expenses Division $1,208,000 899,000
Coolbrook Company has the following information available for the past year: Sales revenue River Cost of goods sold and operating expenses Division $1,208,000 899,000 Stream Division $1,805,000 1,296,000 $ 309,000 $1,110,000 $ 509,000 $1,550,000 Net operating income: Average invested assets. The company's hurdle rate is 6.76 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 11 percent. b. Operating income decreases by 9 percent. c. The company invests $245,000 in each division, an amount that generates $114,000 additional income per division. d. Coolbrook changes its hurdle rate to 4.76 percent.
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