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Watkins Associated Industries is a highly diversified company with three divisions: Trucking, Seafood, and Construction. Assume that the company uses return on investment and residual
Watkins Associated Industries is a highly diversified company with three divisions: Trucking, Seafood, and Construction. Assume that the company uses return on investment and residual income as two of the evaluation tools for division managers. The company has a minimum desired rate of return on investment of 10 percent with a 30 percent tax rate. Selected operating data for three divisions of the company follow. Compute the return on investment for each division. (Round answers to three decimal places.) Compute the residual income for each division. Which of the following is an appropriate statement about the performance of the three divisions: Construction has the superior performance. Residual income is always superior to ROI for assessing performance. Seafood has the superior performance. Trucking has the superior performance. Which division has the superior performance depends on which performance evaluation metric is used to assess performance
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