Question
ROI and Residual Income: Basic Computations Watkins Associated Industries is a highly diversified company with three divisions: Trucking, Seafood, and Construction. Assume that the company
ROI and Residual Income: Basic Computations Watkins Associated Industries is a highly diversified company with three divisions: Trucking, Seafood, and Construction. Assume that the company uses return on investment and residual income as two of the evaluation tools for division managers. The company has a minimum desired rate of return on investment of 10 percent with a 30 percent tax rate. Selected operating data for three divisions of the company follow.
Trucking Division | Seafood Division | Construction Division | |
---|---|---|---|
Sales | $ 1,200,000 | $ 750,000 | $ 900,000 |
Operating assets | 600,000 | 250,000 | 350,000 |
Net operating income | 116,000 | 66,000 | 63,000 |
(a) Compute the return on investment for each division. (Round answers to three decimal places.)
Trucking ROI = | Answer |
Seafood ROI = | Answer |
Construction ROI = | Answer |
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