Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Use the following information to answer the next TWO (2) questions. The Justice Division is one of the three autonomous divisions of Big Brands, Inc.

image text in transcribed
Use the following information to answer the next TWO (2) questions. The Justice Division is one of the three autonomous divisions of Big Brands, Inc. The Justice division has $12,750,000 of capital invested in operating assets, and is currently earning a $3,250,000 operating income annually. A new investment has been proposed to the Justice Division. It will require $5,400,000 of capital in operating assets and will generate $952,000 operating income annually, Big Brands, Inc. requires all its divisions to earn a minimum return of 15% for all investments. 1. What is the Return on Investment (ROI) of Justice Division if it accepts the new investment (1.c., Division's ROI AFTER the new investment)? (Round to 4 decimal places, XX.XX%) 23.15% 32.96% 25.49% 15% 17.63% 2. What is the Residual Income (R) of Justice Division if it accepts the new investment (1.c., Divistion's RI AETER the new investment?) $1,337,500 $2,289,500 $6,924,500 $1,479,500 S142,000

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

College Accounting Ch 1-14

Authors: John Wild, Vernon Richardson, Ken Shaw

1st Edition

0073346896, 9780073346892

More Books

Students also viewed these Accounting questions