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Exercise 10-12 (Algo) Evaluating New Investments Using Return on Investment (ROI) and Residual Income (LO10-1, L010-2) $ 25,937,500 108 Selected sales and operating data for

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Exercise 10-12 (Algo) Evaluating New Investments Using Return on Investment (ROI) and Residual Income (LO10-1, L010-2) $ 25,937,500 108 Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Divinion Division Division Sales $ 12,450,000 $ 14,525,000 Average operating assets $ 3,112,500 $ 7.262,500 $ 5,187,500 Net operating incona $622,500 $ 581,000 5.830,000 Minimum required rate of return 140 161 Required: 1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. 2. Compute the residual income (loss) for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 15% rate of return. a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity? b. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity? Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Req Req 3B Compute the retum on investment (ROI) for each division using the formula stated in terms of margin and turnover. (Do not round Intermediate calculations. Round your answers to 1 decimal place.) Margin Turnover ROI % Division A Division B Division % % % % Reg Reg 2 ) Complete this question by entering your answers in the tabs below. Req1 Req 2 Req Req 38 Compute the residual Income (loss) for each division. (Do not round intermediate calculations. Loss amounts should be indicated by a minus sign.) Division A Division 3 Division Residual income (los) Complete this question by entering your answers in the tabs below. Req1 Reg 2 Req Reg 38 Assume that each division is presented with an investment opportunity that would yield a 15% rate of return. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity? Division A Division B Division C Complete this question by entering your answers in the tabs below. Req1 Reg 2 Req Rely 38 Assume that each division is presented with an investment opportunity that would yield a 15% rate of return. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity? Division A Division B Division

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