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The following data pertain to three divisions of Nevada Aggregates, Inc. The companys required rate of return on invested capital is 8 percent. Division A

The following data pertain to three divisions of Nevada Aggregates, Inc. The companys required rate of return on invested capital is 8 percent.

Division A Division B Division C
Sales revenue ? $ 10,000,000 ?
Income $ 420,000 $ 2,050,000 ?
Average investment ? $ 2,650,000 ?
Sales margin 30 % ? 35 %
Capital turnover 3 ? ?
ROI ? ? 30 %
Residual income ? ? $ 138,000

Required:

  1. Suppose Division As sales margin increased to 35 percent, while its capital turnover remained constant. Compute the divisions new ROI.

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