PA10-1 (Algo) Calculating Return on Investment, Residual Income, Determining Effect of Changes in Sales, Expenses, Invested Assets, Hurdle Rate on Each (LO 10-4, 10-5] Coolbrook Company has the following information available for the past year: Sales revenue Cost of goods sold and operating expenses Net operating income Average invested assets River Division $1,203,000 888,000 $ 315,000 $1,120,000 Stream Division $1,804,000 1,296,000 $ 508,000 $1,590,000 The company's hurdle rate is 6.51 percent. Required: 1. Calculate return on investment (ROI) and residual income for each division for last year. 2. Recalculate ROI and residual income for the division for each independent situation that follows: a. Operating income increases by 10 percent. b. Operating income decreases by 11 percent. c. The company invests $242,000 in each division, an amount that generates $112,000 additional income per division. d. Coolbrook changes its hurdle rate to 4.51 percent. Reg 1 Req 2A Req 2B Req 20 Req 2D Calculate return on investment (ROI) and residual income for each division for last year. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.)) River Division Stream Division ROI 28.12 % 31.94 % Residual Income (Loss) $ (41,412) $ 404,491 Reg 1 Req 2A Req 2B Req 2c Req 2D Recalculate ROI and residual income for each division for the independent situation that follows: Operating income increases by 10 percent. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.). Loss amounts should be indicated with a minus sign.) River Division Stream Division 35.14 ROI 30.93 % % Residual Income (Loss) Req 1 Req 2A Req 2B Req 2c Req 2D Recalculate ROI and residual income for each division for the independent situation that follows: Operating income decreases by 11 percent. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.). Loss amounts should be indicated with a minus sign.) River Division Stream Division 25.03 % 28.43 % ROI Residual Income (Loss) Req 1 Req 2A Req 2B Req 2c Req 2D Recalculate ROI and residual income for each division for the independent situation that follows: The company invests $242,000 in each division, an amount that generates $112,000 additional income per division. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.). Round your "Residual Income (Loss)" answer to the nearest whole dollars. Loss amounts should be indicated with a minus sign.) Show less River Division Stream Division ROI 37.31 % % Residual Income (Loss) Req 1 Req 2A Req 2B Req 2c Req 2D Recalculate ROI and residual income for each division for the independent situation that follows: Coolbrook changes its hurdle rate to 4.51 percent. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.). Loss amounts should be indicated with a minus sign.) River Division Stream Division ROI 28.12 % 31.94 % Residual Income (Loss)
