Question
Coolbrook Company has the following information available for the past year: River Division Stream Division Sales revenue $ 1,201,000 $ 1,800,000 Cost of goods sold
Coolbrook Company has the following information available for the past year:
River Division | Stream Division | ||||
Sales revenue | $ | 1,201,000 | $ | 1,800,000 | |
Cost of goods sold and operating expenses | 894,000 | 1,289,000 | |||
Net operating income | $ | 307,000 | $ | 511,000 | |
Average invested assets | $ | 1,040,000 | $ | 1,550,000 | |
|
The companys hurdle rate is 7.01 percent. Required: 1. Calculate return on investment (ROI) and residual income for each division for last year. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.)) 2. Recalculate ROI and residual income for each division for each independent situation that follows: (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.)) a. Operating income increases by 8 percent. b. Operating income decreases by 9 percent. c. The company invests $256,000 in each division, an amount that generates $116,000 additional income per division. d. Coolbrook changes its hurdle rate to 5.01 percent.
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