Question
Jimbob Co. has four operating divisions with the following information for the most recent fiscal year. Jimbob Co. Sales Net operating income Average operating assets
Jimbob Co. has four operating divisions with the following information for the most recent fiscal year.
Jimbob Co.
Sales
Net operating income
Average operating assets
Division
A
B
C
$12,000,00014,000,00025,000,00010,000,000
600,000
560,000
800,000
D
720,000
$ 3,000,000 7,000,000 5,000,000 6,000,000
The minimum rate of return set by company management is 15%.
Required:
a. What is the return on investment for each division
B If Division B was able to reduce its operating expenses by $70,000, what would be its new return on investment?
C) What is the residual income for each division
D) If the divisions were each offered an opportunity to add an investment that would result in a 17% ROl, which division would less likely to accept the new opportunity?
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