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 Niet operating income Average invested assets River Division $1,205,000 898.00 5 387,000 $ 1,140,000 Stream Division $ 1,812,000 1,283,000 $ 519,800 $1,See, 200 The company's hurdle rate is 6.51 percent Required: 1. Calculate return on investment (Roh 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 8 percent b. Operating income decreases by 9 percent c. The company invests $260.000 in each division, an amount that generates $112.000 additional income per division d. Coolbrook changes its hurdie rate to 451 percent 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, (l.e., 0.1234 should be entered as 12.34%.)) River Division Stream Division ROI Residual Income (Loss) 56 Recalculate ROI and residual income for each division for the independent situation that follows: Operating income increases by 8 percent. (Enter your ROI answers as a percentage rounded to two decimal places, (ie.. 0.1234 should be entered as 12.34%.). Loss amounts should be indicated with a minus sign.) River Division Stream Division ROI Residual Income (Loss Recalculate ROI and residual income for each division for the independent situation that follows: Operating income decreases by 9 percent. (Enter your ROI answers as a percentage rounded to two decimal places, (l.e. 0.1234 should be entered as 12.34%.). Loss amounts should be indicated with a minus sign.) Stream Division River Division % RO Residual income (Loss) Recalculate ROI and residual income for each division for the independent situation that follows: The company invests $260,000 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, (ie, 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 %6 Stream Division 96 ROI Residual income (Loss) 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 Residual income (Loss) 96 96
