River Division			Stream Division
Sales revenue	$	1,201,000		$	1,814,000
Cost of goods sold and operating expenses		888,000			1,294,000
Net operating income	$	313,000		$	520,000
Average invested assets	$	1,060,000		$	1,570,000

The companys hurdle rate is 6.26 percent.

Required:

1. Calculate return on investment (ROI) and residual income for each division for last year.

2. Recalculate ROI and residual income for the division for each independent situation that follows:

a. Operating income increases by 9 percent.

b. Operating income decreases by 8 percent.

c. The company invests $243,000 in each division, an amount that generates $119,000 additional income per division.

d. Coolbrook changes its hurdle rate to 4.26 percent.