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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:
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 Cost of goods sold Miscellaneous operating expenses Interest and taxes Average invested assets $ 1,260,000$939,000 920,000 668,000 54,000 42,000 8,473,000 1,977,000 3,254,000 779,000 65,000 49,000 689,000 53,000 42,000 Wescott is considering an expansion project in the upcoming year that will cost $5.1 million and return $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, (i.e. 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.) Residual income (Loss) Division A Division B Division C 3. Rank the divisions according to the ROl and residual income of each Rank Division A 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 1234%.) Return on Investment of Proposed Expansion Project 4-b. Is this an acceptable project? Yes O No 5. Without any additional calculations, state whether the proposed project would increase or decrease each division's ROI Division A Division B Division 6. Compute the new ROl 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 Income (Loss) ROI Division A Division B Division CStep by Step Solution
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