Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Megatronics Corporation, a massive retailer of electronic products, is organized in four separate divisions. The four divisional managers are evaluated at year-end, and bonuses are

Megatronics Corporation, a massive retailer of electronic products, is organized in four separate divisions. The four divisional managers are evaluated at year-end, and bonuses are awarded based on ROI. Last year, the company as a whole produced a 13 percent return on its investment. During the past week, management of the companys Northeast Division was approached about the possibility of buying a competitor that had decided to redirect its retail activities. (If the competitor is acquired, it will be acquired at its book value.) The data that follow relate to recent performance of the Northeast Division and the competitor:

Northeast Division Competitor
Sales $ 4,300,000 $ 2,700,000
Variable costs 70 % of sales 65 % of sales
Fixed costs $ 1,062,000 $ 889,000
Invested capital $ 950,000 $ 200,000

Management has determined that in order to upgrade the competitor to Megatronics standards, an additional $150,000 of invested capital would be needed.

4. Calculate the Northeast Division's ROI after acquisition of competitor but before upgrading.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

The Art Of Safety Auditing A Tutorial For Regulators

Authors: Sasho Andonov

1st Edition

0367351080, 978-0367351083

More Books

Students also viewed these Accounting questions

Question

Explain briefly how to develop a teambuilding plan.

Answered: 1 week ago

Question

2. Describe why we form relationships

Answered: 1 week ago

Question

5. Outline the predictable stages of most relationships

Answered: 1 week ago