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Johnson Company has two sources of funds: long-term debt and equity capital. Johnson Company has profit centers in the following locations with the following net
Johnson Company has two sources of funds: long-term debt and equity capital. Johnson Company has profit centers in the following locations with the following net incomes and total assets:
Net Income | Assets | ||
---|---|---|---|
Las Vegas | $1,260,000 | $4,000,000 | |
Dallas | 1,500,000 | 8,000,000 | |
Tampa | 2,340,000 | 12,000,000 |
a. Calculate ROI for each profit center and rank them from highest to lowest based on ROI.
Round ROI to the nearest whole percentage.
ROI | Rank | |
---|---|---|
Las Vegas | 123 | |
Dallas | 123 | |
Tampa | 123 |
b. Calculate residual income for each profit center based on a desired ROI of 5% and rank them from highest to lowest based on residual income.
ROI | Rank | |
---|---|---|
Las Vegas | 123 | |
Dallas | 123 | |
Tampa | 123 |
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