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Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division A $ 12,400,000 Division C $
Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division A $ 12,400,000 Division C $ 20,400,000 Division B $ 35,500,000 $ 3,100,000 $ 508,400 7.00% $ 7,100,000 $ 426,000 $ 5,100,000 7.50% $ 510,000 10.00% Sales Average operating assets Net operating income Minimum required rate of return Required: 1. Compute the margin, turnover, and return on investment (ROI) for each division. 2. Compute the residual income (loss) for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 8% rate of return. a. If performance is being measured by ROI, which division or divisions will probably accept the opportunity? b. If performance is being measured by residual income, which division or divisions will probably accept the opportunity? Req 1 Req 2 Req 3A Req 3B Compute the margin, turnover, and return on investment (ROI) for each division. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Margin Turnover Division A % Division B % Division C % ROI % % % Req 1 Req 2 Req 3A Req 3B Compute the residual income (loss) for each division. (Do not round intermediate calculations. Loss amounts should be indicated by a minus sign.) Residual income (loss) Division A Division B Division C Req 1 Req 2 Req 3A Req 3B Assume that each division is presented with an investment opportunity that would yield a 8% 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 Req 1 Req 2 Req 3A Req 3B Assume that each division is presented with an investment opportunity that would yield a 8% 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
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