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Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Net operating income Division A $ 12,600,000
Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Net operating income Division A $ 12,600,000 Division B $ 35,750,000 $ 3,150,000 $ 516,600 9.00% $ 7,150,000 $ 572,000 9.50% Division C $ 20,600,000 $ 5,150,000 $ 597,400 11.60% Sales Average operating assets 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 10% 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?
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