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Need the answer to all three parts of PART 4 ROI and Residual Income A multinational corporation has a number of divisions, two of which
Need the answer to all three parts of PART 4
ROI and Residual Income A multinational corporation has a number of divisions, two of which are the North American Division and the Pacific Rim Division. Data on the two divisions are as follows: Round all rates of return to four significant digits. Required: 1. Compute residual income for each division. By comparing residual income, is it possible to make a useful comparison of divisional performance? would be entered as " 3.83 " percent. North American % Pacific Rim Is it possible now to say that one division outperformed the other? Can we make meaningful comparisons of divisional performance? entered as "3.83" percent. Compare these rates with the ROI computed in Requirement 3 . Will this relationship always be the same? Feedback Theck My Work 1. Residual income = Operating income - (Minimum rate of return x Operating assets) 2. Average operating assets = (Beginning net book value + Ending net book value) 2 3. Return on investment (ROI)= Margin x Turnover or ROI = Operating income Average operating assets 4. Consider if the relationship will always be the sameStep by Step Solution
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