Use the following information for the Exercises below.

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[The following information applies to the questions displayed below.] Megamart, a retailer of consumer goods, provides the following information on two of its departments (each considered an investment center).

Investment Center	Sales			Income			Average Invested Assets
Electronics	$	40,800,000		$	3,060,000		$	17,000,000
Sporting goods		17,680,000			2,210,000			13,000,000

1. Compute return on investment for each department. Using return on investment, which department is most efficient at using assets to generate returns for the company? 2. Assume a target income level of 11% of average invested assets. Compute residual income for each department. Which department generated the most residual income for the company? 3. Assume the Electronics department is presented with a new investment opportunity that will yield a 15% return on investment. Should the new investment opportunity be accepted?

Compute return on investment for each department. Using return on investment, which department is most efficient at using assets to generate returns for the company?

Return on Investment
	Choose Numerator:	/	Choose Denominator:	=	Return on Investment
		/		=	Return on Investment
Electronics		/		=
Sporting Goods		/		=
Which department is most efficient at using assets to generate returns for the company?

Assume a target income level of 11% of average invested assets. Compute residual income for each department. Which department generated the most residual income for the company?

Investment Center	Electronics	Sporting Goods
Net income
Target net income
Residual income
Which department is most efficient at using assets to generate returns for the company?

Assume the Electronics department is presented with a new investment opportunity that will yield a 15% return on investment. Should the new investment opportunity be accepted?

Should the new investment opportunity be accepted?

Compute profit margin and investment turnover for each department. Which department generates the most net income per dollar of sales? Which department is most efficient at generating sales from average invested assets?

Profit Margin
	Choose Numerator:	/	Choose Denominator:	=	Profit Margin
Investment Center		/		=	Profit Margin
Electronics		/		=
Sporting Goods		/		=
Which department generates the most net income per dollar of sales?

Investment Turnover
	Choose Numerator:	/	Choose Denominator:	=	Investment Turnover
Investment Center		/		=	Investment Turnover
Electronics		/		=
Sporting Goods		/		=
Which department is most efficient at generating sales from average invested assets?