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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
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 $ 1,205,000 886,000 $ 319,000 $ 1,140,000 Stream Division $ 1,802,000 1,282,000 $ 520,000 $ 1,450,000 The company's hurdle rate is 8.01 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 12 percent. b. Operating income decreases by 11 percent. c. The company invests $250,000 in each division, an amount that generates $103,000 additional income per division. d. Coolbrook changes its hurdle rate to 6.01 percentStep by Step Solution
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