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ROI and Residual Income: Impact of a New Investment The Stallion Division of Motortown Motors had an operating income of $675,000 and net assets of
ROI and Residual Income: Impact of a New Investment The Stallion Division of Motortown Motors had an operating income of $675,000 and net assets of $2,700,000. Motortown Motors has a target rate of return of 23 percent. (a) Compute the return on investment. (Round your answer to three decimal places.) 25 * (b) Compute the residual income. $ 54,000 (c) The Stallion Division has an opportunity to increase operating income by $100,000 with an $675,000 investment in assets. 1. Compute the Stallion Division's return on investment if the project is undertaken. (Round your answer to three decimal places.) 22.963 X 2. Compute the Stallion Division's residual income if the project is undertaken. Use a negative sign with your answer results in a residual loss. $ 1,250 ROI and Residual Income: Impact of a New Investment The Stallion Division of Motortown Motors had an operating income of $675,000 and net assets of $2,700,000. Motortown Motors has a target rate of return of 23 percent. (a) Compute the return on investment. (Round your answer to three decimal places.) 25 * (b) Compute the residual income. $ 54,000 (c) The Stallion Division has an opportunity to increase operating income by $100,000 with an $675,000 investment in assets. 1. Compute the Stallion Division's return on investment if the project is undertaken. (Round your answer to three decimal places.) 22.963 X 2. Compute the Stallion Division's residual income if the project is undertaken. Use a negative sign with your answer results in a residual loss. $ 1,250
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