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$ Wescott Company has three divisions: A, B, and C. The company has a hurdle rate of 8 percent. Selected operating data for the
$ Wescott Company has three divisions: A, B, and C. The company has a hurdle rate of 8 percent. Selected operating data for the divisions are as follows: Sales revenue Cost of goods sold Miscellaneous operating expenses Interest and taxes Average invested assets Division A $ 1,205,000. 745,000 84,000 68,000 11,760,000 Division B $ 1,300,000 955,000 72,000 61,000 2,870,000 Required: 1. Compute the ROI for each division, 2. Compute the residual income for each division. 3. Rank the divisions according to the ROI and residual income of each. 4-6. Compute the return on investment on the proposed expansion project. 4-b. Is this an acceptable project? Division C $1,338,000 972,000 73,000 61,000 4,717,000 Wescott is considering an expansion project in the upcoming year that will cost $7.3 million and return $664,000 per year. The pr would be implemented by only one of the three divisions. 5. Without any additional calculations, state whether the proposed project would increase or decrease each division's ROI. 6. Compute the new ROI and residual income for each division if the project was implemented within that division.
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