Selected sales and operating data for three divisions of different structural engineering firms are given as follows:
| | Division A | Division B | Division C |
| Sales | $ | 12,840,000 | | $ | 28,840,000 | | $ | 26,050,000 | |
| Average operating assets | $ | 3,210,000 | | $ | 7,210,000 | | $ | 5,210,000 | |
| Net operating income | $ | 564,960 | | $ | 346,080 | | $ | 755,450 | |
| Minimum required rate of return | | 6.00 | % | | 6.50 | % | | 14.50 | % |
| |
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 7% 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?
Check my work 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 (oss) for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 7% 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? points eBook Complete this question by entering your answers in the tabs below. Print References Req 1 Reg 2 Req 3A Reg 3B Compute the residual income (loss) for each division. (Do not round intermediate calculations. Loss amounts should be indicated by a minus sign.) Division A Division B Division C Residual income (loss) Check my work 2 2. Compute the residual income foss) Tor each division, 3. Assume that each division is presented with an investment opportunity that would yield a 7% rate of return. Ich 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? mm points Complete this question by entering your answers in the tabs below. eBook Req 1 Req 2 Req 3A Req 3B Print References Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Margin Turnover ROI % Division A Division B Division C Reqi Req 2 > Check my work 2. Compute the residual income foss) Tor each division, 3. Assume that each division is presented with an investment opportunity that would yield a 7% rate of return. a. If performance is being measured by ROI, which division or divisions will probably ac b. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity? points Complete this question by entering your answers in the tabs below. eBook Req 1 Req 2 Req 3A Reg 3B Print References Assume that each division is presented with an investment opportunity that would yield a 7% rate of return. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity? Division A Division B Division C Check my work 2 2. Compute the residual income foss) Tor each division, 3. Assume that each division is presented with an investment opportunity that would yield a 7% rate of return. Ich 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? points Complete this question by entering your answers in the tabs below. eBook Req 1 Req 2 Req 3A Req 3B Print References Assume that each division is presented with an investment opportunity that would yield a 7% rate of return. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity? Division A Division B Division C Req 3A Req3B >
