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

	River Division			Stream Division
Sales revenue	$	1,220,000		$	1,810,000
Cost of goods sold and operating expenses		895,000			1,285,000
Net operating income	$	325,000		$	525,000
Average invested assets	$	1,170,000		$	1,460,000

The companys 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 9 percent.

b. Operating income decreases by 12 percent.

c. The company invests $247,000 in each division, an amount that generates $107,000 additional income per division.

d. Coolbrook changes its hurdle rate to 4.76 percent.