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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 divislons
Wescott Company has three divisions: A, B, and C. The company has a hurdle rate of 8 percent. Selected operating data for the three divislons are as follows: Division A Division B Division C S 1,260,000$939,000 $920,000 663,000 54,00D 42,000 1,977,000 3,254,000 Sales revenue Cost of goods sold Miscellaneous operating expenses Interest and taxes Average invested assets 779,000 55,000 49.000 889,000 53,000 42,000 Wescott is considering an expansion project in the upcoming year that will cost $5.1 million and retum $455,000 per year. The project would be implemented by only one of the three divisions. Required: 1. Compute the Rol for each division. (Do not round your intermediate calculations. Round your percentage answer to 2 decimal places, (Le. 0.1234 should be entered as 12.34%.)) ROI Division A Division B Division C 2. Compute the residual income for each division. (Loss amounts should be indicated by a minus sign.) Re Division A Division B Division C 3. Rank the divisions according to the ROl and residual income of each. Rank DivisionA Division B Division C 4-a. Compute the return on investment on the proposed expansion project. (Round your percentage answer to 2 decimal places, (i.e. 0.1234 should be entered as 12.34%.)) Project 4-b. ls this an acceptable project? No Yes 5. Without any additional calculations, state whether the propased project would increase or decrease each division's RO DivisionA 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 entered with a minus sign. Enter your ROl percentage answers to 2 decimal places, (i.e., 0.1234 should be entered as 12.34%.)) sidua ROI Income (Loss) Division A Division B Division C
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