Finch Corporation operates three investment centers. The following financial statements apply to the investment center named Bowman Division. BOWMAN DIVISION Income Statement For the Year Ended December 31, Year 2 Sales revenue $ 106,980 Cost of goods sold 59,775 Gross margin 47,205 Operating expenses Selling expenses (2,680) Depreciation expense (4,095) Operating income 40,430 Nonoperating item Loss on sale of land (3,600) Net income $ 36,830 BOWMAN DIVISION Balance Sheet As of December 31, Year 2 Assets Cash Accounts receivable Merchandise inventory Equipment less accumulated depreciation Nonoperating assets Total assets Liabilities Accounts payable Notes payable Stockholders' equity Common stock Retained earnings Total liabilities and stockholder's equity $ 12,522 40,466 37,000 99,368 9,600 $189,956 $ 9,477 68,000 77,000 35,479 $ 189,956 BOWMAN DIVISION Balance Sheet As of December 31, Year 2 Assets Cash Accounts receivable Merchandise inventory Equipment less accumulated depreciation Nonoperating assets Total assets Liabilities Accounts payable Notes payable Stockholders' equity Common stock Retained earnings Total liabilities and stockholder's equity $ 12,522 40,466 37,000 90,368 9,600 $ 189,956 $ 9,477 68,000 77,000 35,479 $189,956 Required c. Calculate the ROI for Bowman. d. Finch has a desired ROI of 14 percent. Headquarters has $91,000 of funds to assign to its investment centers. The manager of the Bowman Division has an opportunity to invest the funds at an ROI of 16 percent. The other two divisions have investment opportunities that yield only 15 percent. Calculate the new ROI for Bowman division, if the investment opportunity is adopted by Bowman. e. Based on the original data, calculate the original residual income. Also, calculate the new residual income based on information provided in Requirement d. Complete this question by entering your answers in the tabs below. Required C Required D Required E Calculate the ROI for Bowman. (Round your answer to 2 decimal places. (i.e., 0.2345 should be entered as 23.45).) ROI % Required Required D > Complete this question by entering your answers in the tabs below. Required C Required D Required E Finch has a desired ROI of 14 percent. Headquarters has $91,000 of funds to assign to its investment centers. The manager of the Bowman Division has an opportunity to invest the funds at an ROI of 16 percent. The other two divisions have investment opportunities that yield only 15 percent. Calculate the new ROI for Bowman division, if the investment opportunity is adopted by Bowman. (Round your answer to 2 decimal places. (i.e., 0.2345 should be entered as 23.45).) Show less New ROI
