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Sun Oil has three regions. Each region's required rate of return is 35 percent. Planned operating results for 2023 are: Division Revenues Investment Operating Income
Sun Oil has three regions. Each region's required rate of return is 35 percent. Planned operating results for 2023 are: Division Revenues Investment Operating Income North America 50.000,000 $125,000,000 $40,000,000 Europe 80.000,000 $200,000.000 $56.000,000 Asia 40,000.000 $80,000,000 $32,000,000 The company is planning an expansion requiring each region to increase its investments by $25,000,000 resulting in income of $9,000,000 and revenues of $12,000,000. Paragraph BIUA EEv + v A. Compute the current ROI for each region (6 marks) North America Europe Asia B. Compute the residual income for each region (6 marks) North America Europe Asia C. Compute residual income and ROI for the expansion.(4 marks) Residual income ROI D. Which region(s) would be pleased with the expansion assuming managers are evaluated on a ROI? Why? (2 marks) E. Which region(s) would be pleased with the expansion assuming mangers are evaluated on RI? Why? ( 2 marks) F. Companies may use net book value of fixed assets as a means for measuring assets. Explain net book value of fixed assets. (2 marks)
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