PA10-3 (Algo) Evaluating Managerial Performance, Proposed Project Impact on Return on Investment, Residual Income (LO 10-4, 10-5] Wescott Company has three divisions: A, B, and C. The company has a hurdle rate of 8 percent. Selected operating data for the three divisions are as follows: Sales revenue Cost of goods sold Miscellaneous operating expenses Interest and taxes Average invested assets Division A Division B Division C $ 1,270,000 $ 977,000 $ 964,000 785,000 717,000 700,000 67,000 55,000 56,000 51,000 44,000 44,000 8,819,000 2,071,000 3,408,000 Wescott is considering an expansion project in the upcoming year that will cost $5.3 million and return $477,000 per year. The project would be implemented by only one of the three divisions. Required: 1. Compute the ROI for each division. 2. Compute the residual income for each division. 3. Rank the divisions according to the ROI and residual income of each. 4-a. Compute the return on investment on the proposed expansion project. 4-b. Is this an acceptable project? 5. Without any additional calculations, state whether the proposed project would increase or decrease each division's ROI. 6. Compute the new ROI and residual income for each division if the project was implemented within that division. Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4A Req 4B Req 5 Req 6 Compute the ROI for each division. (Do not round your intermediate calculations. Round your percentage answer to 2 decimal places, (i.e. 0.1234 should be entered as 12.34%.)) ROI Division A % Division B % Division C Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Req 3 Reg 4A Req 4B Req 5 Req Rank the divisions according to the ROI and residual income of each. Rank Division A Division B Division C Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Req 3 Req 4A Req 4B Req 5 Req 6 Compute the return on investment on the proposed expansion project. (Round your percentage answer to 2 decimal places, (i.e. 0.1234 should be entered as 12.34%.)) Return on Investment of Proposed Expansion Project % Req3 Req 4B > Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req3 Req 4A Req 4B Req 5 Req 6 Is this an acceptable project? Is this an acceptable project? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4A Req 4B Req 5 Req Reg 5 Without any additional calculations, state whether the proposed project would increase or decrease each division's ROI. Division A Division B Division C Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3 Req 4A Req 4B Req 5 Req 6 Compute the new ROI and residual income for each division if the project was implemented within that division. (Loss amounts should be entered with a minus sign. Enter your ROI percentage answers to 2 decimal places, (i.e., 0.1234 should be entered as 12.34%.)) ROI Residual Income (Loss) Division A % Division B % Division C %
