Redmond Awnings, a division of Wrap-up Corp., has a net operating income of $60,000 and average operating assets of $300,000. The required rate of return for the company is 15%.

5a. What is the divisions ROI?

a. 25%

b. 5% c.

15%

d. 20%

5b. If the manager of the division is evaluated based on ROI, will she want to make an investment of $100,000 that would generate additional net operating income of $18,000 per year?

a. Yes

b. No

5c. The companys required rate of return is 15%. Would the company want the manager of the Redmond Awnings division to make an investment of $100,000 that would generate additional net operating income of $18,000 per year?

a. Yes

b. No

5d. What is the divisions residual income (before the additional investment)?

a. $240,000

b. $ 45,000

c. $ 15,000

d. $ 51,000

5e. If the manager of the division is evaluated based on residual income, will she want to make an investment of $100,000 that would generate additional net operating income of $18,000 per year?

a. Yes

b. No