Question
Orange Corp. has two divisions: Fruit and Flower. The following information for the past year is available for each division: Fruit Division Flower Division Sales
Orange Corp. has two divisions: Fruit and Flower. The following information for the past year is available for each division: Fruit Division Flower Division Sales revenue $ 1,740,000 $ 2,610,000 Cost of goods sold and operating expenses 1,392,000 1,957,500 Net operating income $ 348,000 $ 652,500 Average invested assets $ 3,480,000 $ 2,718,750 2. Suppose Orange is investing in new technology that will increase each divisions operating income by $131,000. The total investment required is $2,200,000, which will be split evenly between the two divisions. Calculate the ROI and residual income for each division after the investment is made. 3. Determine whether both managers will support the investment.
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