Megamart, a retailer of consumer goods, provides the following Information on two of its departments (each considered an Investment center). Investment Center Electronice Sporting goods Sales Income $40,500,000 $2,916,000 20,740,000 2,074,000 Average Invested Assets $16,200,000 12,200,000 Exercise 22-10 Computing return on investment and residual income; investing decision LO A1 1. Compute return on investment for each department. Using return on investment, which department is most efficient at using assets to generate returns for the company? 2. Assume a target income level of 11% of average invested assets. Compute residual income for each department which department generated the most residual Income for the company? 3. Assume the Electronics department is presented with a new investment opportunity that will yield a 15% return on investment. Should the new investment opportunity be accepted? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Assume a target Income level of 11% of average invested assets. Compute residual income for each department. Which department generated the most residual income for the company? Investment Center Electronics Sporting Goods Not income $ 2916,000 $ 2,074,000 Target net income Residual income Which department is most efficient at using Electronics wth Investment Center Electronics Sporting goods Sales Income $40,500,000 $2,916,000 20,740,000 2,074,000 Average Invested Assets $16,200,000 12,200,000 Exercise 22-10 Computing return on investment and residual income; Investing decision LO A1 1. Compute return on investment for each department. Using return on investment, which department is most efficient at using assets to generate returns for the company? 2. Assume a target income level of 11% of average invested assets. Compute residual income for each department. Which department generated the most residual income for the company? 3. Assume the Electronics department is presented with a new investment opportunity that will yield a 15% return on investment Should the new investment opportunity be accepted? Complete this question by entering your answers in the tabs below. Required Required 2 Required 3 Assume a target income level of 11% of average invested assets. Compute residual income for each department, which department generated the most residual income for the company? Investment Center Electronics Sporting Goods Net Income $ 2.916,000 2,074,000 Target net income Residual income Which department is most efficient at using assets to generate returns for the company? Electronics
