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Finch lechnologies, Inc. has three divisions. Finch has a desired rate of return of 12.0 percent. The operating assets and income for each division
Finch lechnologies, Inc. has three divisions. Finch has a desired rate of return of 12.0 percent. The operating assets and income for each division are as follows: Divisions Printer Operating Assets $ 600,000 Operating Income $102,000 Copier Fax Total 870,000 420,000 $1,890,000 99,180 60,060 $261,240 Finch headquarters has $126,000 of additional cash to invest in one of its divisions. The division managers have identified investment opportunities that are expected to yield the following ROIs: Divisions Printer Copier Fax Expected ROIs for Additional Investments 13.5% 12.5% 11.5% Required a-1. Calculate the ROI for each division. a-2. Which division manager is currently producing the highest ROI? b. Based on ROI, which division manager would be most eager to accept the $126,000 of investment funds? c. Based on ROI, which division manager would be least likely to accept the $126,000 of investment funds? d. Which division offers the best investment opportunity for Finch? g. Calculate the residual income: (1) At the corporate (headquarters) level before the additional investment. (2) At the division level before the additional investment. (3) At the investment level. (4) At the division level after the additional investment.
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