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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 $1,225,000 $1,224,000 $1,250,000 Sales revenue Cost of goods sold 899,000 908,000 Miscellaneous operating expenses Interest and taxes 757,000 80,000 64,000 68,000 69,000 57,000 57,000 Average invested assets 11,068,000 2,682,000 4,409,000 Wescott is considering an expansion project in the upcoming year that will cost $6.9 million and return $620,000 per year. The project would be implemented by only one of the three divisions. Req 1 Req 2 Req 3 Req 4A Req 4B Req 5 Req 6 Compute the ROI 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 Req 1 Req 2 Req 3 Req 4A Req 4B Req 5 Req 6 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 Req 1 Req 2 Req 3 Req 4A Req 4B Rank the divisions according to the ROI and residual income of each. Rank Division A Division B Division C Req 5 Req 6 Req 1 Req 2 Req 3 Req 4A Req 4B Req 5 Req 6 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%.)) Return on Investment of Proposed Expansion Project % Req 1 Req 2 Req 3 Req 4A Req 4B Req 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%.)) ROI Residual Income (Loss) Division A Division B Division C % %
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