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

	River Division			Stream Division
Sales revenue	$	1,210,000		$	1,804,000
Cost of goods sold and operating expenses		892,000			1,288,000
Net operating income	$	318,000		$	516,000
Average invested assets	$	1,150,000		$	1,450,000

The companys hurdle rate is 7.26 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 8 percent.

c. The company invests $249,000 in each division, an amount that generates $118,000 additional income per division.

d. Coolbrook changes its hurdle rate to 5.26 percent.