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Perez Home Maintenance Company earned operating income of $6,132,000 on operating assets of $58,400,000 during Year 2. The Tree Cutting Division earned $1,169,600 on operating
Perez Home Maintenance Company earned operating income of $6,132,000 on operating assets of $58,400,000 during Year 2. The Tree Cutting Division earned $1,169,600 on operating assets of $6,880,000. Perez has offered the Tree Cutting Division $2,220,000 of additional operating assets. The manager of the Tree Cutting Division believes he could use the additional assets to generate operating income amounting to $439,560. Perez has a desired return on investment (ROI) of 8.50 percent. Required Calculate the return on investment for Perez, the Tree Cutting Division, and the additional investment opportunity. Calculate the residual income for Perez, the Tree Cutting Division, and the additional investment opportunity
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