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

River DivisionStream DivisionSales revenue$1,210,000$1,803,000Cost of goods sold and operating expenses884,0001,287,000Net operating income$326,000$516,000Average invested assets$1,040,000$1,490,000

The company's hurdle rate is 7.51 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 8 percent.

b.Operating income decreases by 8 percent.

c.The company invests $246,000 in each division, an amount that generates $118,000 additional income per division.

d.Coolbrook changes its hurdle rate to 5.51 percent.