Problem 25.1A (Algo) Empire Hotel (LO25-2, LO25-3, LO25-4) The Empire Hotel is a full-service hotel in a large city. Empire is organized into three departments that are treated as investment centers. Budget information for the coming year for these three departments is shown as follows. The managers of each of the departments are evaluated and bonuses are awarded each year based on ROI. Empire Hotel Hotel Rooms Average investment Sales revenue Operating expenses Operating earnings $ 8,446,000 $10,000,000 8,437,000 $ 1,563,000 Restaurants $5,255,000 $2,000,000 1,242,000 Health Spa $1,006,000 $ 600,000 487,000 $ 758,000 $ 113,000 Required: a. Compute the ROI for each department. Use the DuPont method to analyze the return on sales and capital turnover. Assume the Health Spa is considering installing new exercise equipment. Upon investigating, the manager of the division finds that the equipment would cost $40,000 and that operating earnings would increase by $8,000 per year as a result of the new equipment. b-1. What would be the ROI of investment in the new exercise equipment and Health Spa? b-2. Would the manager of the Health Spa be motivated to undertake such an investment? c-1. Compute the residual income for each department if the minimum required return for the Empire Hotel is 17 percent. c-2. What would be the impact of the investment on the Health Spa's residual income? Complete this question by entering your answers in the tabs below. Req A Req B1 Req B2 Req C1 Req C2 Compute the ROI for each department. Use the DuPont method to analyze the return on sales and capital turnover. (Round your percentage answers to 2 decimal places (1.e., 0.1234 should be considered as 12.34.)) Req A Req B1 Req B2 Req C1 Req C2 Compute the ROI for each department. Use the DuPont method to analyze the return on sales and capital turnover. (Round your percentage answers to 2 decimal places (l.e., 0.1234 should be considered as 12.34.))) Departments Hotel Rooms Restaurants Health Spa Return on ROI Sales Capital Turnover % % Req A Req B1 Req B2 Req C1 Req C2 What would be the ROI of investment in the new exercise equipment and Health Spa? (Round your percentage answ decimal places (i.e., 0.1234 should be considered as 12.34.)) Exercise Equipment Health Spa ROI % Req A Req B1 Req B2 Req C1 Req C2 Compute the residual income for each department if the minimum required return for the Empire Hotel is 17 percent. (Loss amounts should be Indicated with a minus sign.) Departments Residual Income (loss) Hotel Rooms Restaurants Health Spa Req A Req B1 Req B2 Req C1 Req C2 What would be the impact of the investment on the Health Spa's residual income? Impact of the investment