Coolbrook Company has the following information available for the past year: River Division Stream Division Sales revenue $ 1,215,000 $ 1,804,000 Cost of goods sold and operating expenses 898,000 1,282,000 Net operating income $ 317,000 $ 522,000 Average invested assets $ 1,120,000 $ 1,470,000 The companys hurdle rate is 7.76 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 9 percent. c. The company invests $247,000 in each division, an amount that generates $108,000 additional income per division. d. Coolbrook changes its hurdle rate to 5.76 percent.