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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 three divisions
Wescott Company has three divisions: A, B, and C. The company has a hurdle rate of 8 percent. Selected operating data for the three divisions are as follows: Division A Division B Division C $ 1,285,000 $ 1,034,000 $ 1,030,00e Sales revenue Cost of goods sold Miscellaneous operating expenses Interest and taxes 794,000 70,000 759,000 58,000 47,00e 2,212,000 748,000 59,000 47,000 3,639,000 54,000 Average invested assets 9,338,000 Wescott is considering an expansion project in the upcoming year that will cost $5.6 million and return $510,000 per year. The project would be implemented by only one of the three divisions. 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-a. Compute the return on investment on the proposed expansion project. 4-b. Is this an acceptable project? 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. Complete this question by entering your answers in the tabs below. Req 4A Req 1 Req 2 Req 3 Req 4B Rea 5 Req 6 Compute the new ROI and residual income for each division if the project was implemented within that division. (Loss amounts should be entered with a minus sign. Enter your ROI percentage answers to 2 decimal places, (i.e., 0.1234 should be entered as 12.34%.)) Residual ROI Income (Loss) Division A Division B Division C
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