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 $ 6,600,000 $ 10,600,000 $ 9,700,000 Average operating assets $ 1,650,000 $ 5,300,000 $ 2,425,000 Net operating income $ 376,200 $ 1,028,200 $ 286,150 Minimum required rate of return 18.00 % 19.40 % 15.00 % Required: 1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. (Round your Turnover answers to 2 decimal places. Round your Margin and ROI percentage answers to 2 decimal places (i.e., 0.1234 should be entered as 12.34).) 2. Compute the residual income (loss) for each division. (Loss amounts should be indicated by a minus sign. Round your Required Rate of Return percentage answers to 2 decimal places (i.e., 0.1234 should be entered as 12.34).) 3. Assume that each division is presented with an investment opportunity that would yield a 20% rate of return. a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity?
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