In: Accounting
Selected sales and operating data for three divisions of different structural engineering firms are given as follows:
Division A | Division B | Division C | |||||||
Sales | $ | 12,440,000 | $ | 35,550,000 | $ | 25,550,000 | |||
Average operating assets | $ | 3,110,000 | $ | 7,110,000 | $ | 5,110,000 | |||
Net operating income | $ | 547,360 | $ | 639,900 | $ | 740,950 | |||
Minimum required rate of return | 10.00 | % | 10.50 | % | 14.50 | % | |||
Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
|
Compute the residual income (loss) for each division. (Do not round intermediate calculations. Loss amounts should be indicated by a minus sign.)
|
Assume that each division is presented with an investment opportunity that would yield a 11% rate of return. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity?
|
Assume that each division is presented with an investment opportunity that would yield a 11% rate of return. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity?
|