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River Division Stream Division Sales revenue $ 1,211,000 $ 1,807,000 Cost of goods sold and operating expenses 885,000 1,293,000 Net operating income $ 326,000 $

River Division

Stream Division

Sales revenue

$

1,211,000

$

1,807,000

Cost of goods sold and operating expenses

885,000

1,293,000

Net operating income

$

326,000

$

514,000

Average invested assets

$

1,170,000

$

1,590,000

The companys hurdle rate is 8.01 percent. Required: 1. Calculate return on investment (ROI) and residual income for each division for last year. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.)) 2. Recalculate ROI and residual income for each division for each independent situation that follows: (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.)) a. Operating income increases by 10 percent. b. Operating income decreases by 12 percent. c. The company invests $256,000 in each division, an amount that generates $115,000 additional income per division. d. Coolbrook changes its hurdle rate to 6.01 percent.

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