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Coolbrook Company has the following information available for the past year: River Division Stream Division Sales revenue $ 1,210,000 $ 1,810,000 Cost of goods sold
Coolbrook Company has the following information available for the past year:
River Division | Stream Division | |
---|---|---|
Sales revenue | $ 1,210,000 | $ 1,810,000 |
Cost of goods sold and operating expenses | 884,000 | 1,286,000 |
Net operating income | $ 326,000 | $ 524,000 |
Average invested assets | $ 1,070,000 | $ 1,420,000 |
The companys hurdle rate is 7.26 percent.
Required:
- Calculate return on investment (ROI) and residual income for each division for last year.
- Recalculate ROI and residual income for each division for each independent situation that follows:
- Operating income increases by 10 percent.
- Operating income decreases by 8 percent.
- The company invests $244,000 in each division, an amount that generates $108,000 additional income per division.
- Coolbrook changes its hurdle rate to 5.26 percent.
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