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Sorry for the long question but I will rate correct answers, thank you in advance! The Empire Hotel is a full-service hotel in a large
Sorry for the long question but I will rate correct answers, thank you in advance!
The Empire Hotel is a full-service hotel in a large city. Empire is organized into three departments that are treated as investment centers. Budget information for the coming year for these three departments is shown as follows. The managers of each of the departments are evaluated and bonuses are awarded each year based on ROI. Empire Hotel Average investment Sales revenue Operating expenses Operating earnings Hotel Rooms $ 8,238,80 $ 10,eee,8e8 8,669,8ee $ 1,331,008 Restaurants $ 4,876,80e $2,00e, eee 1,044,0ee $956,e00 Health Spa $ 1,217,80e $600, e00 417,e00 $183,eee a. Compute the ROl for each department. Use the DuPont method to analyze the return on sales and capital turnover. Assume the Health Spa is considering installing new exercise equipment. Upon investigating, the manager of the division finds that the equipment would cost $40,000 and that operating earnings would increase by $8,000 per year as a result of the new equipment. b-1. What would be the ROIl of investment in the new exercise equipment and Health Spa? b-2. Would the manager of the Health Spa be motivated to undertake such an investment? c-1. Compute the residual income for each department if the minimum required return for the Empire Hotel is 17 percent. c-2. What would be the impact of the investment on the Health Spa's residual income? a. Compute the ROI for each department. Use the DuPont method to analyze the return on sales and capital turnover. (Round your percentage answers to 2 decimal places (i.e., 0.1234 should be considered as 12.34.)) Return on Sales Capital Turnover Departments ROI Hotel Rooms Restaurants Health Spa b-1 What would be the ROI of investment in the new exercise equipment and Health Spa? (Round your percentage answers to 2 decimal places (i.e., 0.1234 should be considered as 12.34.)) Exercise Equipment Health Spa ROI b-2. Would the manager of the Health Spa be motivated to undertake such an investment? Would the manager motivated? Compute the residual income for each department if the minimum required return for the Empire Hotel is 17 percent. (Loss amounts should be indicated with a minus sign.) Departments Hotel Rooms Restaurants Health Spa Residua Income (loss) What would be the impact of the investment on the Health Spa's residual income? Impact of the investmentStep by Step Solution
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