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Hawkins Ceramics, a division of Patterson Corporation, has an operating income of $73,000 and total assets of $415,000. The required rate of retum for the
Hawkins Ceramics, a division of Patterson Corporation, has an operating income of $73,000 and total assets of $415,000. The required rate of retum for the company is 11%. The company is evaluating whether it should use ROI or Rl as a measurement of performance for its division managers. The manager of Hawkins Ceramics has the opportunity to undertake a new project that will require an investment of $90,000. This investment would earn $16,500 for Hawkins Ceramic Read the requirements. Requirement 1. What is the original ROI for Hawkins Ceramics (before making any additional investment)? First, select the labels to complete the formula for the retum on investment. ROI A. ROI= Operating income - Total assets B. ROI= Sales - Total assets C. ROI= Operating income - Sales D. ROI = Total assets + Operating income 1. What is the original ROI for Hawkins Ceramics (before making any additional investment)? 2. What would the ROI be for Hawkins Ceramics if this investment opportunity were undertaken? Would the manager of the Hawkins Ceramics division want to make this investment if she evaluated it based on Rol? Why or why not? 3. What is the ROI of the investment opportunity? Would the investment be desirable from the standpoint of Patterson Corporation? Why or why not? 4. What would the RI be for Hawkins Ceramics if this investment opportunity were undertaken? Would the manager of the Hawkins Ceramics division want to make this investment if she evaluated it based on RI? Why or why not? 5. What is the RI of the investment opportunity? Would the investment be desirable from the standpoint of Patterson Corporation? Why or why not? 6. Which performance measurement method. ROI or RI, promotes goal congruence? Why
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