PA10-1 Calculating Return on Investment, Residual Income, Determining Effect of Changes in Sales, Expenses, Invested Asset, Hurdle Rate on Each [LO 10-4, 10-5]

Coolbrook Company has the following information available for the past year:

	River Division			Stream Division
Sales revenue	$	1,200,000		$	1,813,000
Cost of goods sold and operating expenses		897,000			1,284,000
Net operating income	$	303,000		$	529,000
Average invested assets	$	1,180,000		$	1,510,000

The companys hurdle rate is 7.76 percent. Required: 1. 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%.)) 2. Recalculate ROI and residual income for each division for each independent situation that follows: (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.)) a. Operating income increases by 8 percent. b. Operating income decreases by 12 percent. c. The company invests $253,000 in each division, an amount that generates $113,000 additional income per division. d. Coolbrook changes its hurdle rate to 5.76 percent.