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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 | ? | $ | 11,000,000 | ? | |||||||||
| Income | $ | 510,000 | $ | 2,000,000 | ? | ||||||||
| Average investment | ? | $ | 2,660,000 | ? | |||||||||
| Sales margin | 40 | % | ? | 45 | % | ||||||||
| Capital turnover | 3 | ? | ? | ||||||||||
| ROI | ? | ? | 30 | % | |||||||||
| Residual income | ? | ? | $ | 124,000 | |||||||||
Required:
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Suppose Division As sales margin increased to 45 percent, while its capital turnover remained constant. Compute the divisions new ROI.
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