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Exercise 10.16 ROI and Residual Income A multinational corporation has a number of divisions, two of which are the North American Division and the Pacific
Exercise 10.16 ROI and Residual Income A multinational corporation has a number of divisions, two of which are the North American Division and the Pacific Rim Division. Data on the two divisions are as follows: North American Pacific Rim $6,700,000 Average operating assets $15,000,000 1,250,000 Operating income 610,000 Minimum required return 7% 7% Required: 1. Compute residual income for each division. North American Pacific Rim By comparing residual income, is it possible to make a useful comparison of divisional performance? Select your answer -LV 2. Compute the residual rate of return by dividing the residual income by the average operating assets. Enter your answers as percentages, rounded to two decimal places. For example, the decimal value .03827 would be entered as "3.83" percent. North American Pacific Rim Is it possible now to say that one division outperformed the other? Select your answer V
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