Question

Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division A Division B Division C   Sales $ 5,400,000 $ 9,400,000 $ 8,500,000   Average operating assets $ 1,080,000 $ 4,700,000 $ 1,700,000   Net operating income $ 243,000 $ 799,000 $ 148,750   Minimum required rate of return 14.00 % 17.00 % 11.00 % Required: 1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. (Round your Turnover answers to 2 decimal places. Round your Margin and ROI percentage answers to 2 decimal places (i.e., 0.1234 should be entered as 12.34).) Margin Turnover ROI Division A % % Division B % % Division C % %        2. Compute the residual income (loss) for each division. (Loss amounts should be indicated by a minus sign. Round your Required Rate of Return percentage answers to 2 decimal places (i.e., 0.1234 should be entered as 12.34).)    Division A Division B Division C Average operating assets    required rate of return required operating income Actual operating income    Required operating income above Residual income (loss)      3. Assume that each division is presented with an investment opportunity that would yield a 16% rate of return.    a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity? Division A Division B Division C              b. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity? Division A Division B Division C

please show every single step on how do you fien the answer thank you

Answer 1

1)
		Margin	Turnover	ROI
	Division A	4.50%	5	22.50%
	Division B	8.50%	2	17.00%
	Division C	1.75%	5	8.75%
	Margin = Net operating income/sales
	Turnover = sales/Average operating assets
	ROI         = margin * turnover
2)				Division A	Division B	Division B
	Average operating assets			1,080,000	4,700,000	1,700,000
	Required rate of return			14%	17%	11%
	required operating income			151200	799000	187000
	Actual operating income			243,000	799,000	148,750
	Required operating income abo			151,200	799,000	187,000
	residual income (loss)			91,800	0	-38,250
	Residual income = net operating income -(average operating assets*min
	Required rate of return)
3a)	Division A	Accept
	Division B	Accept
	Division C	Reject
3b)	Division A	Accept
	Division B	Accept
	Division C	Reject