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Problem 12-4 Comparing Performance Using ROI (LO2 - CC4, 6) uses the return on investment (ROI) measure to evaluate its managers. A summary of the
Problem 12-4 Comparing Performance Using ROI (LO2 - CC4, 6) uses the return on investment (ROI) measure to evaluate its managers. A summary of the performance of two divisions is given below: Average operating assets Net income Division A $ 180,000 32,400 Division B $ 240,000 40,800 The minimum required return on operating assets for Guenther Corporation is 16%. Required: 1-a. Compute the return on investment of Division A and Division B. DivisionA Division B Return on investment 1-b. According to Guenther's senior management, which division is the better performer? Division A Division B 2-a. Compute the residual income of Division A and Division B. DivisionA Division B Residual income
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