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Rooney Technologies, Inc. has three divisions. Rooney has a desired rate of return of 12.5 percent. The operating assets and income for each division are

Rooney Technologies, Inc. has three divisions. Rooney has a desired rate of return of 12.5 percent. The operating assets and income for each division are as follows:

Divisions Operating Assets Operating Income
Printer $ 670,000 $ 108,540
Copier 940,000 100,580
Fax 490,000 66,640
Total $ 2,100,000 $ 275,760

Rooney headquarters has $133,000 of additional cash to invest in one of its divisions. The division managers have identified investment opportunities that are expected to yield the following ROIs:

Expected ROIs for
Divisions Additional Investments
Printer 14.0 %
Copier 13.0 %
Fax 12.0 %

Required

  1. a-1. Calculate the ROI for each division.

  2. a-2. Which division manager is currently producing the highest ROI?

  3. b. Based on ROI, which division manager would be most eager to accept the $133,000 of investment funds?

  4. c. Based on ROI, which division manager would be least likely to accept the $133,000 of investment funds?

  5. d. Which division offers the best investment opportunity for Rooney?

  6. g. Calculate the residual income:

  1. (1) At the corporate (headquarters) level before the additional investment.

  2. (2) At the division level before the additional investment.

  3. (3) At the investment level.

  4. (4) At the division level after the additional investment.image text in transcribedimage text in transcribed

Req A1 Req A2 to D Req G1 Req G2 to G4 Calculate the residual income at the corporate (headquarters) level before the additional investment Residual income Req A1 Req A2 to D Req G1 Req G2 to G4 Calculate the residual income: (Loss amounts should be indicated by a minus sign.) (2) At the division level before the additional investment. (3) At the investment level. (4) At the division level after the additional investment. Rectangular Snip Residual Income (loss) (2) Printer division Copier division Fax division (3) Printer division Copier division Fax division Printer division Copier division Fax division Req G1 Req G2 to G4 >

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