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Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Sales Average operating assets Net operating income Minimum
Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Sales Average operating assets Net operating income Minimum required rate of return Division A $6,300,000 $1,260,000 $ 340,200 20.00% Division B $10,300,000 $ 5,150,000 $ 968,200 18.80% Division C $9,400,000 $1,880,000 $ 249,100 17.00% Required: 1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. (Round your answers to 2 decimal places.) the return on investment ) for each avaien vaing the form ROI Margin 5.40% Division A Division B Division C Turnover times 2.00 times times 2. Compute the residual income (loss) for each division. (Loss amounts should be indicated by a minus sign. Round your "Required rate of return" to 2 decimal places.) Division A Division B Division C % % Average operating assets Required rate of return Required operating income Actual operating income Required operating income (above) Residual income (loss) 3. Assume that each division is presented with an investment opportunity that would yield a 22% rate of return. a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity? Division A Division B Division C b. 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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