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ROI and Residual Income: Basic Computations Watkins Associated Industries is a privately held conglomerate. Assume that the company uses return on investment and residual income

ROI and Residual Income: Basic Computations Watkins Associated Industries is a privately held conglomerate. 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 15%. Selected operating data for three of the divisions of the company follow.

Trucking Division Seafood Division Construction Division
Sales $6,450,000 $1,845,000 $5,200,000
Operating assets 3,750,000 580,000 1,750,000
Net operating income 525,000 116,000 385,000

(a) Compute the return on investment for each division. (Round answers to three decimal places.)

Trucking ROI = Answer
Seafood ROI = Answer
Construction ROI = Answer

(b) Compute the residual income for each division. Note: Use a negative sign if residual income is a loss.

Residual income Trucking Seafood Construction
Net operating income Answer Answer Answer
Minimum level Answer Answer Answer
Residual income Answer Answer Answer

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