The companys hurdle rate is 7.01 percent.
Required:
1. Calculate return on investment (ROI) and residual income for each division for last year.
2. Recalculate ROI and residual income for the division for each independent situation that follows:
a. Operating income increases by 9 percent.
b. Operating income decreases by 11 percent.
c. The company invests $250,000 in each division, an amount that generates $111,000 additional income per division.
d. Coolbrook changes its hurdle rate to 5.01 percent.
PA10-1 (Algo) Calculating Return on Investment, Residual Income, Determining Effect of Changes in Sales, Expenses, Invested Assets, Hurdle Rate on Each (LO 10-4, 10-5] Coolbrook Company has the following information available for the past year: Sales revenue Cost of goods sold and operating expenses Net operating income Average invested assets River Division $1,207,000 881,000 $ 326,000 $1,020,000 Stream Division $1,816,000 1,283,000 $ 533,000 $1,550,000 The company's hurdle rate is 7.01 percent. Required: 1. Calculate return on investment (ROI) and residual income for each division for last year. 2. Recalculate ROI and residual income for the division for each independent situation that follows: a. Operating income increases by 9 percent. b. Operating income decreases by 11 percent. c. The company invests $250,000 in each division, an amount that generates $111,000 additional income per division. d. Coolbrook changes its hurdle rate to 5.01 percent. Complete this question by entering your answers in the tabs below. Reg 1 Req 2A Req 2B Req 2C Req 2D Calculate return on investment (ROI) and residual income for each division for last year. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.)) River Division Stream Division ROI Residual Income (Loss) Complete this question by entering your answers in the tabs below. Reg 1 Req 2A Req 2B Req 2C Req 2D Recalculate ROI and residual income for each division for the independent situation that follows: Operating income decreases by 11 percent. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.). Loss amounts should be indicated with a minus sign.) River Division Stream Division ROI Residual Income (Loss) Complete this question by entering your answers in the tabs below. Reg 1 Req 2A Req 2B Req 2C Req 2D Recalculate ROI and residual income for each division for the independent situation that follows: Operating income decreases by 11 percent. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.). Loss amounts should be indicated with a minus sign.) River Division Stream Division ROI Residual Income (Loss) Complete this question by entering your answers in the tabs below. Reg 1 Req 2A Req 2B Reg 2C Req 2D Recalculate ROI and residual income for each division for the independent situation that follows: The company invests $250,000 in each division, an amount that generates $111,000 additional income per division. (Enter your ROI answers as a percentage rounded to two decimal places, i.e., 0.1234 should be entered as 12.34%.). Round your "Residual Income (Loss)" answer to the nearest whole dollars. Loss amounts should be indicated with a minus sign.) Show less A River Division Stream Division ROI Residual Income (Loss) Reg 2B Req 2D > Complete this question by entering your answers in the tabs below. Reg 1 Req 2A Req 2B Reg 2B Reg 2C Req 2D Recalculate ROI and residual income for each division for the independent situation that follows: Coolbrook changes its hurdle rate to 5.01 percent. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.). Loss amounts should be indicated with a minus sign.) River Division Stream Division ROI Residual Income (Loss) ( Req 2C A Req 20
