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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 Sales revenue Cost of goods sold Miscellaneous operating expenses Interest and taxes Average invested assets $ 1,225,000 $ 1,224,000 $ 1,250,000 908,000 69,000 57,000 4,409,000 757,000 80,000 64,000 11,068,000 899,000 68,000 57,000 2,682,000 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 Required 1. Compute the ROI for each division. (Do not round your intermediate calculations. Round your percentage answer to 2 decimal places, (ie, 0.1234 should be entered as 12.34%.)) ROI DivisionA DivisionEB Division C 2. Compute the residual income for each division. (Loss amounts should be indicated by a minus sign.) Residual income Loss Division A DivisionB Division
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