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 investmer 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 Requilred a. Compute the ROI for each department. Use the DuPont method to analyze the retum 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 $80,000 and that operating earnings would increase by $14,400 per year as a result of the new equipment. b-1. What is the ROI of the investment in the new exercise equipment? What impact does the investment in the exercise equipment have on the Health Spa's ROI? 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 16 percent. c2. What would be the Impact of the Investment in part b on the Health Spa's residual income? Complete this question by entering your answers in the tabs below. What is the ROI of the investment in the new exercise equipment? What impact does the investment in the excercise equipment have on the Health Spa's ROI? Note: Round your percentage answers to 2 decimal places (1.f., 0.1234 should be considered as 12.34.) 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. Required . 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 $80,000 and that operating earnings would increase by $14,400 per year as a result of the new equipment. b-1. What is the ROI of the investment in the new exercise equipment? What impact does the investment in the exercise equipment have on the Health Spa's ROI? 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 16 percent. c2. What would be the impact of the investment in part b on the Health Spa's residual income? Complete this question by entering your answers in the tabs below. Compute the residual income for each department if the minimum required return for the Empire Hotel is 15 percent. Notes Loss amounts should be indicated with a minus sign
