Exercise 11-12 Evaluating New Investments Using Return on Investment (ROI) and Residual Income [LO11-1, LO11-2) Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Sales Average operating assets Het operating income Minimum required rate of return Division A $ 12,000,000 $ 3,000,000 $ 600,000 Division B $ 14,000,000 $ 7,000,000 $ 560,000 105 Division c $ 25,000,000 $ 5,000,000 $ 800,000 168 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. Reg 1 Reg 2 Reg 3A Reg 38 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 1 decimal place.) Margin Turnover ROI Division A Division B Division % % % % Exercise 11-12 Evaluating New Investments Using Return on Investment (ROI) and Residual Income [LO11-1, LO11-2] Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Sales Average operating assets Net operating income Minimum required rate of return Division $ 12,000,000 $ 3,000,000 600,000 145 Division B $ 14,000,000 $ 7,000,000 $ 560,000 105 Division c $ 25,000,000 $ 5,000,000 $ 800,000 16 $ 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. Req1 Reg 2 Reg 3A Reg 3B Compute the residual income (loss) for each division. (Loss amounts should be indicated by a minus sign.) Division A Division B Division C Residual income foss) Exercise 11-12 Evaluating New Investments Using Return on Investment (ROI) and Residual Income [LO11-1, LO11-2) Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Sales Average operating assets Net operating income Minimum required rate of return Division 1 $ 12,000,000 $ 3,000,000 $ 600,000 148 Division 1 $ 14,000,000 $ 7,000,000 $ 560,000 100 Division C $ 25,000,000 $ 5,000,000 $ 800,000 168 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. Reg 1 Reg 2 Reg 3A 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 Exercise 11-12 Evaluating New Investments Using Return on Investment (ROI) and Residual Income [LO11-1, LO11-2) Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Sales Average operating assets Net operating income Minimum required rate of return Division $ 12,000,000 $ 3,000,000 $ 600,000 141 Division $ 14,000,000 $ 7,000,000 $ 560,000 101 Division c $ 25,000,000 $ 5,000,000 $ 800,000 165 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 yleld 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. Reg 1 Reg 2 Reg 3A 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 residual income, which division or divisions will probably accept or reject the opportunity? Division A Division B Division C