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Luke Company has three divisions: Peak, View, and Grand. The company has a hurdle rate of 6.76 percent. Selected operating data for the three divisions
Luke Company has three divisions: Peak, View, and Grand. The company has a hurdle rate of 6.76 percent. Selected operating data for the three divisions follow:
Peak | View | Grand | ||||
Sales revenue | $ | 342,000 | $ | 238,000 | $ | 306,000 |
Cost of goods sold | 205,000 | 113,000 | 182,000 | |||
Miscellaneous operating expenses | 44,000 | 31,000 | 37,000 | |||
Average invested assets | 1,350,000 | 940,000 | 1,025,000 | |||
Required: 1. Compute the return on investment for each division. 2. Compute the residual income for each division.
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