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Required information [The following information applies to the questions displayed below.] Megamart provides the following information on its two investment centers. Investment Center Electronics Sporting
Required information [The following information applies to the questions displayed below.] Megamart provides the following information on its two investment centers. Investment Center Electronics Sporting goods Sales Income $ 42,960,000 $ 3,222,000 18,904,000 2,363,000 Average Assets $ 17,900,000 13,900,000 1. Compute return on investment for each center. Using return on investment, which center is most efficient at using assets to generate income? 2. Assume a target income of 12% of average assets. Compute residual income for each center. Which center generated the most residual income? 3. Assume the Electronics center is presented with a new investment opportunity that will yield a 14% return on investment. Should the new investment opportunity be accepted? The target return is 12%.
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