You are provided with Sales, Expenses, and beginning & ending Assets values for the year. These are shown for three operating divisions: East, Central and West.

Calculate the Residual Income, Simplified ROI, and DuPont ROI methods.

Assume a target rate of return of 29%.

Rank the performance of each division for ROI and Residual Value.

A B C D E F H 1 Problem 2 2 West Division Type your name here East Division Sales Expenses Net Income 25 Points Central Division 7,360,000 5,544,000 3 11,520,000 10,720,000 Sales Expenses Net Income 4 Sales Expenses Net Income 4,064,000 3,392,000 5 6 2,640,000 2,784,000 Assets: 12/01/19 Assets: 12/31/19 Investment - annual avg. 4,480,000 5,440,000 Assets: 12/01/19 Assets: 12/31/19 Investment - annual avg. 1,920,000 2,160,000 7 Assets: 12/01/19 8 Assets: 12/31/19 9 Investment - annual avg. 10 11 Target Rate of Return 12 13 29.00% Target Rate of Return 29.00% Target Rate of Return 29.00% 14 15 Net Income 16 Investment - annual avg. 17 ROI 18 Simplified Return on Investment Method Net Income Investment - annual avg. ROI Net Income Investment - annual avg. ROI 19 20 21 11,520,000 Dupont Method - Return on Investment Method Profit Margin Sales 7,360,000 Net Income Profit Margin 4,064,000 Sales Net Income Profit Margin 22 Sales Net Income Profit Margin 23 24 11,520,000 7,360,000 4,064,000 25 26 Sales 27 Investment - annual avg. 28 Asset turnover 29 Asset Turnover Sales Investment - annual avg. Asset turnover Sales Investment - annual avg. Asset turnover 30 Dupont Method - Return on Investment Central Division - ROI 31 East Division - ROI West Division - ROI 11,520,000 7,360,000 4,064,000 25 26 Sales 27 Investment - annual avg. 28 Asset turnover 29 Asset Turnover Sales Investment - annual avg. Asset turnover Sales Investment -annual avg. Asset turnover 30 Dupont Method - Return on Investment Central Division - ROI 31 East Division - ROI West Division - ROI 32 33 34 Net Income 35 Required return 36 Residual income 37 Residual Income Net Income Required return Residual income Net Income Required return Residual income 38 Division Performance - Rank: Best= 1 , Worst =3 ROI - DuPont Method 39 40 Residual Income 41