Question 4

Consider the following data for three divisions of a company, X, Y, and Z:

Divisional:	X			Y			Z
Sales	$	1,385,000		$	884,000		$	4,676,000
Operating Income		145,500			110,800			234,200
Investment in assets		312,900			417,400			3,173,500

The asset turnover (AT) for Division Y is calculated to be (rounded):

Multiple Choice

• 2.25.

• 2.32.

• 2.12.

• 4.43.

• 2.93.

Consider the following data from two divisions of a company, P and Q:

Divisional	P			Q
Sales	$	388,800		$	288,000
Operating Income	$	216,000		$	180,000
Investment	$	2,700,000		$	2,000,000

If both divisions were presented with an opportunity to invest in a project that is estimated to achieve an ROI of 8%, what will the units likely decide?

Multiple Choice

• Division P will invest; Division Q will not invest.

• Division P will invest; Division Q will be indifferent.

• Division P will not invest; Division Q will invest.

• Division P will be indifferent; Division Q will not invest.

• Neither unit will invest in the projects.