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Please take not of any instructions for decimal points!! Wescott Company has three divisions: A, B, and C. The company has a hurdle rate of
Please take not of any instructions for decimal points!!
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 $ 1,255,000 $ 920,000 $ 898,000 776,000 675,000 652,000 64,000 52,000 53, 100 48,000 41,000 41,500 8,300,000 1,930,000 3,215,000 Wescott is considering an expansion project in the upcoming year that will cost $5 million and return $450,000 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 Reg 4A Reg 4B Reg 5 Reg 6 Compute the ROI for each division. (Do not round your intermediate calculations. Enter your answers as a whole percentage, (i.e., 0.123 should be entered as 12%.)) ROI Division A % Division B % Division C % Req 1 Req 2 Req 3 Req 4A Req 4B Reg 5 Req 6 Compute the residual income for each division. (Loss amounts should be indicated by a minus sign.) Residual income (Loss) Division A Division B Division C Req 1 Reg 2 Req3 Req 4A Reg 4B Req 5 Reg 6 Rank the divisions according to the ROI and residual income of each. Rank Division A Division B Division C Req 1 Req 2 Reg 3 Req 4A Req 4B Req 5 Reg 6 Compute the return on investment on the proposed expansion project. Return on Investment of Proposed Expansion Project % Req 1 Reg 2 Req 3 Req 4A Reg 4B Req 5 Req 6 Is this an acceptable project? Is this an acceptable project? Reg 1 Reg 2 Req 3 Reg 4A Req 4B Reg 5 Reg 6 Without any additional calculations, state whether the proposed project would increase or decrease each division's ROI. Division A Division B Division C Req 1 Req 2 Req3 Req 4A Reg 4B Req 5 Reg 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 %Step by Step Solution
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