Question
Coolbrook Company has the following information available for the past year: River Division Stream Division Sales revenue $ 1,214,000 $ 1,814,000 Cost of goods sold
Coolbrook Company has the following information available for the past year:
River Division | Stream Division | ||||
Sales revenue | $ | 1,214,000 | $ | 1,814,000 | |
Cost of goods sold and operating expenses | 897,000 | 1,286,000 | |||
Net operating income | $ | 317,000 | $ | 528,000 | |
Average invested assets | $ | 1,150,000 | $ | 1,580,000 | |
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 10 percent.
b. Operating income decreases by 12 percent.
c. The company invests $250,000 in each division, an amount that generates $115,000 additional income per division.
d. Coolbrook changes its hurdle rate to 5.26 percent.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started