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The SkipperCorporation had net operating income of $380,000 and average operating assets of $2,000,000. The corporation requires a return on investment of 18%. Required: a.
| The SkipperCorporation had net operating income of $380,000 and average operating assets of $2,000,000. The corporation requires a return on investment of 18%. |
| Required: |
| a. Calculate the company's return on investment (ROI) and residual income (RI). |
| b. SkipperCorporation is considering an investment of $70,000 in a project that will generate annual net operating income of $12,950. Would it be in the best interests of the company to make this investment? |
| c. SkipperCorporation is considering an investment of $70,000 in a project that will generate annual net operating income of $12,950. If the division planning to make the investment currently has a return on investment of 20% and its manager is evaluated based on the division's ROI, will the division manager be inclined to request funds to make this investment? |
| d. SkipperCorporation is considering an investment of $70,000 in a project that will generate annual net operating income of $12,950. If the division planning to make the investment currently has a residual income of $50,000 and its manager is evaluated based on the division's residual income, will the division manager be inclined to request funds to make this investment? |
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Mastering The Five Tiers Of Audit Competency Internal Audit And IT Audit
Authors: Ann Butera
1st Edition
1498738494, 978-1498738491
