Question
Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division A Division B Division C Sales $
Selected sales and operating data for three divisions of different structural engineering firms are given as follows:
Division A | Division B | Division C | |||||||
Sales | $ | 15,300,000 | $ | 35,300,000 | $ | 20,240,000 | |||
Average operating assets | $ | 3,060,000 | $ | 7,060,000 | $ | 5,060,000 | |||
Net operating income | $ | 703,800 | $ | 529,500 | $ | 526,240 | |||
Minimum required rate of return | 9.00 | % | 9.50 | % | 10.40 | % | |||
Required:
1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover.
2. Compute the residual income (loss) for each division.
3. Assume that each division is presented with an investment opportunity that would yield a 10% rate of return.
a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity?
b. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity?
Required: 1. Compute the return on investment (ROl) for each division using the formula stated in terms of margin and turnover. 2. Compute the residual income (loss) for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 10% rate of return. a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity? b. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3A Req 3B Compute the return on investment (ROI) for each division using the formula stated in terms o round intermediate calculations. Round your answers to 2 decimal places.) Margin Turnover ROI Division A Division B Division C Req 1 Req 2 Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3A Req 3B Compute the residual income (loss) for each division. (Do not round intermediate calculations. indicated by a minus sign.) Division A Division B Division C Residual income (loss) Req 1 Req 2 Req 3A Req 3B Assume that each division is presented with an investment opportunity that would yield a 10% is being measured by ROI, which division or divisions will probably accept or reject the opport Division A Division B Division C Assume that each division is presented with an investment opportunity that would yield a 10% is being measured by residual income, which division or divisions will probably accept or rejec Division A Division B Division C
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