Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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

image text in transcribed
image text in transcribed
image text in transcribed
image text in transcribed
Megatronics Corporation, a massive retaller 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 15 percent return on its investment During the past week, management of the company's 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 ocquired at its book value.) The doto that follow relote to recent performance of the Northeast Division and the competitor: Management has determined that in order to upgrade the competitor to Megatronics' standard5, an additional $125,000 of invested capital would be needed Required: 1. Compute the current ROl of the Northeast Division and the division's ROl if the competitor is acquired. 2. If divisional management is being evaluated on the basis of ROl, will the Northeast Division likely pursue acquisition of the competitor? 3-a. Compute the ROl of the competitor as it is now ond after the intended upgrade. 3.b. If ROI is used as the basis for evaluation, would Megatronics Corporation likely be in fovor of the acquisition of the competitor? 4. Calculate the Northeast Division's ROl after acquisition of competitor but before upgrading 5-a. Assume that Megatronics uses residual income to evaluote performance and desires a 12 percent minimum return on invested copital. Compute the current residual income of the Northeast Division and the division's residual income if the competitor is acquired. 5-b. If divisional manogement is being evoluoted on the bosis of residual income, will the Northeast Division likely pursue acquisition of the competior? Complete this question by entering your answers in the tabs below. Compute the current Thor of the Northeast Oivision and the division's Rof if the competitor is acquired. (Round your answers to 2 decimal places (Le. .1234 should be entered os 12.34) ). 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 ROl. Last year, the company as a whole produced a 15 percent return on its investment. During the past week, management of the company's 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: Management has determined that in order to upgrade the competitor to Megatronics' standards, an additional $125,000 of invested capital would be needed Required: 1. Compute the current ROI of the Northeast Division and the division's ROI if the competitor is acquired. 2. If divisional management is being evaluated on the basis of ROI, will the Northeast Division likely pursue acquisition of the competitor? 3-a. Compute the ROI of the competitor as it is now and after the intended upgrade. 3-b. If ROI is used as the basis for evaluation, would Megatronics Corporation likely be in favor of the acquisition of the competitor? 4. Calculate the Northeast Division's ROl after acquisition of competitor but before upgrading. 5-a. Assume that Megatronics uses residual income to evaluate performance and desires a 12 percent minimum return on invested capital. Compute the current residual income of the Northeast Division and the division's residual income if the competitor is acquired. 5-b. If divisional management is being evaluated on the basis of residual income, will the Northeast Division likely pursue acquisition of the competitor? Complete this question by entering your answers in the tabs below. Compute the ROI of the competitor as it is now and ofter the intended upgrade. 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 ROl. Last year, the company as a whole produced a 15 percent return on its investment During the past week, management of the company's Northeast Division was approached about the possiblity of buying a competitor that had decided to redirect its retall 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: Management has determined that in order to upgrade the competitor to Megatronics' standards, an additional $125,000 of invested capital would be needed. Required: 1. Compute the current ROI of the Northeast Division and the division's ROl if the competitor is acquired. 2. If divisional management is being evaluated on the basis of ROI, will the Northeast Division likely pursue acquisition of the competitor? 3.a. Compute the ROl of the competitor as it is now and after the intended upgrade. 3-b. If ROI is used as the basis for evaluation, would Megatronics Corporation likely be in favor of the acquisition of the competitor? 4. Calculate the Northeast Division's ROl after acquisition of competitor but before upgrading. 5-a. Assume that Megatronics uses residual income to evaluate performance and desires a 12 percent minimum return on invested capital. Compute the current residual income of the Northeast Division and the division's residual income if the competitor is acquired. 5-b. If divisional management is being evaluated on the bosis of residual income, will the Northeast Division likely pursue ocquisition of the competitor? Complete this question by entering your answers in the tabs below. Calculate the Northeast Division's ROI after acquisition of competitor but before upgrading. (Round your answer to 2 decimal places (i.e., 1234 should be entered as 12.34).) Megatronics Corporation, a massive retaller 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 15 percent return on its investment. During the past week, management of the company's 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: Management has determined that in order to upgrade the competitor to Megatronics' standards, an additional $125,000 of Invested capital would be needed. Required: 1. Compute the current ROl of the Northeast Division and the division's ROI if the competitor is acquired. 2. If divisional management is being evaluated on the basis of ROI, will the Northeast Division likely pursue acquisition of the competitor? 3-a. Compute the ROl of the competitor as it is now and after the intended upgrade. 3.b. If ROI is used as the basis for evaluation, would Megatronics Corporation likely be in favor of the acquisition of the competitor? 4. Calculate the Northeast Division's ROl after acquisition of competitor but before upgrading. 5.a. Assume that Megatronics uses residual income to evaluate performance and desires a 12 percent minimum return on invested capital. Compute the current residual income of the Northeast Division and the division's residual income if the competitor is acquired 5.b. If divisional management is being evaluoted on the bosis of residual income, will the Northeast Division likely pursue acquisition of the competitor? Complete this question by entering your answers in the tabs below. Assume that Megatronics uses residual income to evaluate performance and desires a 12 percent minimum return on invested capital. Compute the current residual income of the Northeast Division and the division's residual income if the competitor is acquired

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

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

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

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

Get Started

Students also viewed these Accounting questions