PA10-1 (Static) 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 $1,200,000 900,000 $ 300,000 $1,200,000 Stream Division $1,800,000 1,300,000 $ 500,000 $1,800,000 The company's hurdle rate is 6 percent. Required: 1. Calculate return on investment (ROI) and residual income for each division for last year. 2. Recalculate ROI and residual income for each division for each independent situation that follows: a. Operating income increases by 10 percent. b. Operating income decreases by 10 percent. c. The company invests $250,000 in each division, an amount that generates $100,000 additional income per division. d. Coolbrook changes its hurdle rate to 10 percent. Complete this question by entering your answers in the tabs below. Reg 1 Req ZA Reg 2B Reg 2c 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 Residual Income (Loss) Complete this question by entering your answers in the tabs below. Req1 Req ZA Reg 28 Req 2c Reg 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, (.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) Complete this question by entering your answers in the tabs below. Reg 1 Reg 2A Reg 28 Reg 2C Req 2D Recalculate ROI and residual income for each division for the independent situation that follows: Operating income decreases by 10 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.) River Division % Stream Division % ROI Residual income (Loss) Complete this question by entering your answers in the tabs below. Reg 1 Req ZA Req 23 Reg 2C Req 2D Recalculate ROI and residual income for each division for the independent situation that follows: The company invests $250,000 in each division, an amount that generates $100,000 additional income per division. (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.) Show less River Division Stream Division ROI Residual Income (Loss) Complete this question by entering your answers in the tabs below. Reg 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 10 percent. (Enter your ROI answers as a percentage rounded to two decimal places, (.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)
