The Aircond Turbocharger . 11,000 The OR 90.000 34.00 Operating room Required: 1. Compute the ROI for each cment project. Round to the nearest whole percent Air conditioner, Turbocharge ROI 2. Compute the budgeted division ROI for each of the following four alternatives. Round to two decimal places The ser conditioned investment is made b. The turbocharger investment is made Both mvestments are made de either additional investment is made 2. Concept Connection Assuming that divisional managers are evaluated and rewarded on the basis of Hof performance which alternative do you think the divisional age will choose? 4. Conceptual Connection: Suppose that the companys a minimum required rate of returneual to 14 Calculate the residual income for each of the following four alternatives . The air conditioner investments made b. The turbocharger investment is made both investments are made. Nother additional investment is made Which option will the manager choose based on residual income? 5. Conceptual Connection Sopote that the companys minimum required to return alto 30% Calculate the income for each of the following formatives The conditioner investment is made b. The chartment is made c. Both investments are made Neither adonal investment is made on residual income, which is the most profitable? Cuck. Hy w 4 Chey were ebook Return on Investment for Multiple Investments, Residual income The manager of a division that produces add-on products for the automobile industry has just been presented the opportunity to invest in two independent projects. The first is an air conditioner for the back seats of vans and minivans. The second is a turbocharger. Without the investments, the division will have average assets for the coming year of $29.4 million and expected operating income of $4.335 million. The outsay required for each investment and the expected operating incomes are as follows: Air conditioner Turbocharger Outlay $1,250,000 $540,000 Operating income 90,000 94.080 Required: 1. Compute the ROI for each investment project. Round to the nearest whole percent. Air conditioner, ROI Turbocharger, ROI 2. Compute the budgeted divisional ROI for each of the following four alternatives. Round to two decimal places . The air conditioner investment is made b. The turbocharger investment is made c. Both investments are made. d. Neither additional investment is made. 5 3. Conceptual Connection: Assuming that divisional managers are evaluated and rewarded on the basis of ROI performance, which alternative do you think the divisional manager will choose? 4. Conceptual Connection: Suppose that the company sets a minimum required rate of return equal to 14%. Calculate the residual income for each of the following four alternatives: a. The air conditioner investment is made. b. The turbocharger investment is made. C. Both investments are made d. Neither additional investment is made Which options will the manager choose based on residual income? Check My Work 4 more Check My Work uses remaining Save and Submit Assignment for Grading 1. Compute the ROI for each investment project. Round to the nearest whole percent. Air conditioner, ROI Turbocharger, ROI 96 2. Compute the budgeted divisional ROI for each of the following four alternatives. Round to two decimal places a. The air conditioner investment is made. 96 b. The turbocharger investment is made. % c. Both investments are made. % d. Neither additional investment is made. 3. Conceptual Connection Assuming that divisional managers are evaluated and rewarded on the basis of ROI performance, which alternative do you think the divisional manager will choose?
