During 2015, Heady Company (HC) reported operating income of $30,000,000 on operating assets of $200,000,000. During the same period, the companys speaker Division (SD) reported income of $6,000,000 on operating income assets of $30,000,000. Heady has offered the SD division $7,500,000 of additional operating assets to invest in new project. The manager of the SDs division thinks she could generate additional income of $1,200,000 from these new assets. Heady company has a desired/target return on investment (ROI) of 12%.

Requirements

A)Provide ROI calculation for each of the following:

i)The Heady Company

ii)The SD division

iii)The additional investment opportunity

B)Provide residual income (RI) calculation for each of the following:

I)The Heady Company

II)The SD division

III)The additional investment opportunity