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 $ 1,800,000 Cost of goods sold and operating expenses 900,000 1,300,000 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Net operating income $ 300,000 $ 500,000 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Average invested assets $ 1,200,000 $ 1,800,000 -------------------------------------------------------------------------------- The companys hurdle rate is 6 percent. Required: 1. Calculate return on investment (ROI) and residual income for each division for last year. (Do not round your intermediate calculations. Round "ROI" answers to 1 decimal place.) 2. Recalculate ROI and residual income for each division for each independent situation that follows: a. Operating income increases by 10 percent. (Do not round your intermediate calculations. Round "ROI" answers to 2 decimal places.) b. Operating income decreases by 10 percent. (Do not round your intermediate calculations. Round "ROI" answers to 1 decimal place.) c. The company invests $250,000 in each division, an amount that generates $100,000 additional income per division. (Do not round your intermediate calculations. Round "ROI" answers to 2 decimal places.) d. Coolbrook changes its hurdle rate to 10 percent. (Do not round your intermediate calculations. Round "ROI" answers to 1 decimal places.)