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 Sales revenue $ 1,235,000 $ 1,186,000 $ 1,206,000 Cost of goods sold 763,000 871,000 876,000 Miscellaneous operating expenses 78,000 66,000 67,000 Interest and taxes 62,000 55,000 55,000 Average invested assets 10,722,000 2,588,000 4,255,000 Wescott is considering an expansion project in the upcoming year that will cost $4 6 million and return $598,000 per year The project would be implemented by only one of the three divisions Required 1 Compute the ROI for each division (Do not round your intermediate calculations Round your percentages to 2 decimal places ) ROI Division A Division B Division C 2 Compute the residual income for each division (Loss amounts should be indicated by a minus sign ) Residual Income Division A Division B Division C 3 Rank the divisions according to the ROI and residual income of each Rank Division A Division B Division C 4 a Compute the return on the proposed expansion project (Round your percentages to 2 decimal places ) Return on Proposed Expansion project 4 b Is this an acceptable project Yes No 5 Without any additional calculations, state whether the proposed project would increase or decrease each divisions ROI and state whether the division manager would accept or reject the proposed project Division A Division B Division C 6 Compute the new ROI and residual income for each division if the project was implemented within that division (Loss amounts should be indicated by a minus sign Do not round your intermediate calculations Round your percentages to 2 decimal places ) ROI Residual Income Division A Division B Division C

Question

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 Sales revenue $ 1,235,000 $ 1,186,000 $ 1,206,000 Cost of goods sold 763,000 871,000 876,000 Miscellaneous operating expenses 78,000 66,000 67,000 Interest and taxes 62,000 55,000 55,000 Average invested assets 10,722,000 2,588,000 4,255,000 Wescott is considering an expansion project in the upcoming year that will cost $4 6 million and return $598,000 per year  The project would be implemented by only one of the three divisions  Required  1 Compute the ROI for each division  (Do not round your intermediate calculations  Round your percentages to 2 decimal places ) ROI Division A           Division B           Division C           2 Compute the residual income for each division  (Loss amounts should be indicated by a minus sign ) Residual Income Division A            Division B            Division C            3 Rank the divisions according to the ROI and residual income of each  Rank Division A           Division B           Division C           4 a  Compute the return on the proposed expansion project  (Round your percentages to 2 decimal places ) Return on Proposed Expansion project             4 b  Is this an acceptable project  Yes No 5 Without any additional calculations, state whether the proposed project would increase or decrease each divisions ROI and state whether the division manager would accept or reject the proposed project  Division A                       Division B                       Division C                       6 Compute the new ROI and residual income for each division if the project was implemented within that division  (Loss amounts should be indicated by a minus sign  Do not round your intermediate calculations  Round your percentages to 2 decimal places ) ROI Residual Income Division A                      Division B                      Division C

Accepted Answer

The Answer is in the image, click to view ...

Question

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

Step by Step Solution

Step: 1

Get Instant Access with AI-Powered Solutions

Step: 2

Step: 3

Ace Your Homework with AI

Students also viewed these Accounting questions

Question

Question

Question

Question

Question

Question

Question

Question

Question

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
Sales revenue	$	1,235,000	$	1,186,000	$	1,206,000
Cost of goods sold		763,000		871,000		876,000
Miscellaneous operating expenses		78,000		66,000		67,000
Interest and taxes		62,000		55,000		55,000
Average invested assets		10,722,000		2,588,000		4,255,000

Wescott is considering an expansion project in the upcoming year that will cost $4.6 million and return $598,000 per year. The project would be implemented by only one of the three divisions.

Required:
1	Compute the ROI for each division. (Do not round your intermediate calculations. Round your percentages to 2 decimal places.)
		ROI
	Division A	________%
	Division B	________%
	Division C	________%
2
Compute the residual income for each division. (Loss amounts should be indicated by a minus sign.)
		Residual Income
	Division A	__________
	Division B	__________
	Division C	__________

3
Rank the divisions according to the ROI and residual income of each.
		Rank
	Division A	_________
	Division B	_________
	Division C	_________
4-a.
Compute the return on the proposed expansion project. (Round your percentages to 2 decimal places.)
	Return on Proposed Expansion project __________%


4-b.
Is this an acceptable project?


	Yes
	No

5
Without any additional calculations, state whether the proposed project would increase or decrease each divisions ROI and state whether the division manager would accept or reject the proposed project.
	Division A	__________	__________
	Division B	__________	__________
	Division C	__________	__________

6
Compute the new ROI and residual income for each division if the project was implemented within that division. (Loss amounts should be indicated by a minus sign. Do not round your intermediate calculations. Round your percentages to 2 decimal places.)
		ROI	Residual Income
	Division A	________%	__________
	Division B	________%	__________
	Division C	________%	__________