Question
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
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 Hotel Rooms Restaurants Health Spa Average investment $ 10,000,000 $ 6,250,000 $ 1,250,000 Sales revenue $ 11,250,000 $ 2,500,000 $ 800,000 Operating expenses 9,315,000 1,617,500 644,000 Operating earnings $ 1,935,000 $ 882,500 $ 156,000 Required a. Compute the ROI 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 $63,000 and that operating earnings would increase by $11,340 per year as a result of the new equipment. b-1. What is the ROI of the investment in the new exercise equipment? What impact does the investment in the exercise equipment have on the Health Spas ROI?c-2. What would be the impact of the investment in part b on the Health Spas residual income?
Complete this question by entering your answers in the tabs below. What is the ROI of the investment in the new exercise equipment? What impact does the investment in the exercise equipment have on the Health Spa's ROI? Note: Round your percentage answers to 2 decimal places (i.e., 0.1234 should be considered as 12.34.) Complete this question by entering your answers in the tabs below. What would be the impact of the investment in part b on the Health Spa's residual incor
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