Exercise 10-12 Evaluating New Investments Using Return on Investment (ROI) and Residual Income [LO10-1, LO10-2] Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division Division Division Sales 57,300,000 $ 11,300.000 $ 10,400,000 Average operating assets $ 1,460, see 55.650.000 52.080.000 Net operating Income $ 467,200 $ 1,175,200 379,600 Minus required rate of return 27.06% 20.sex 24.ex 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 27% rate of return. a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity? bir performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity? -ences Complete this question by entering your answers in the tabs below. Reg1 Reg2 Reg DA Req3B Compute the return 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 2 decimal places.) Margin Turnover ROI Division A Division Division Reg 2 > Exercise 10-12 Evaluating New Investments Using Return on Investment (ROI) and Residual Income (LO10-1, L010-2) Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division Division Division Sales $ 7.300,000 $ 11,300,000 $ 10,400,000 Average operating assets $ 1,460.ee $ 5,650,000 $ 2.080.000 Net operating Incone $ 467,200 5 1.175,200 379.600 Minimu required rate of return 22.00% 20.se 24.00% $ 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 foss) for each division 3. Assume that each division is presented with an investment opportunity that would yield a 27% rate of return of performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity bit performance is being measured by residual income, which division or disions will probably accept or reject the opportunity ces Complete this question by entering your answers in the tabs below. Reg1 Req2 Red Reg 3 Compute the residual income (oss) for each division. (Do not round intermediate calculations. Loss amounts should be indicated by a minussion) DIVISION A Division Division Residual come down) Exercise 10-12 Evaluating New Investments Using Return on investment (ROI) and Residual Income [LO10-1, LO10-2) Selected sales and operating data for three divisions of different structural engineering firms are given as follows Average operating assets et operating income Mis required rate of return Division A $ 7,300,000 $ 1.400.000 $ 467,200 27.00% Division $ 11,300,000 $ 5,650.000 1.175,200 20.00 Division $ 10,600,000 $ 2,650,000 $ 479,60 24.00 Required: 1 compute the return on investment (RO) for each division using the formula stated in terms of margir 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 27% rate of retum all performance is being measured by ROI which division or divisions will probably accept or reject the opportunity b. I performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity? onces Complete this question by entering your answers in the tabs below. Teg Reg2 Reg Reg 20 Assume that each division is presented with an investment opportunity that would yield a 27% rate of return. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity? lovision A Division Divion Accept Rejed
