A Utility Corporation uses the investment center concept for the service stations that it manages in the city. Consolidated has a 15% required rate of return on investment in order for a branch station to be viable. Select operating data for three of its stations for 2017 are as follows: Demon Street Angel Street Elves Street Revenue $17,000,000 $13,500,000 $15,000,000 Operating Assets $7,000,000 $7,000,000 $6,000,000 Net Operating Income $900,000 $1,200,000 $980,000 Required: Compute the return on investment for each station Which station manager is doing best based only on ROI? Why? Are any of the stations in danger of being closed due to lack of performance?
A Utility Corporation uses the investment center concept for the service stations that it manages in the city. Consolidated has a 15% required rate of return on investment in order for a branch station to be viable. Select operating data for three of its stations for 2017 are as follows: Demon Street Angel Street Elves Street Revenue $17,000,000 $13,500,000 $15,000,000 Operating Assets $7,000,000 $7,000,000 $6,000,000 Net Operating Income $900,000 $1,200,000 $980,000 Required: Compute the return on investment for each station Which station manager is doing best based only on ROI? Why? Are any of the stations in danger of being closed due to lack of performance?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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A Utility Corporation uses the investment center concept for the service stations that it manages in the city. Consolidated has a 15% required rate of
| Demon Street | Angel Street | Elves Street | |
| Revenue | $17,000,000 | $13,500,000 | $15,000,000 |
| Operating Assets | $7,000,000 | $7,000,000 | $6,000,000 |
| Net Operating Income | $900,000 | $1,200,000 | $980,000 |
Required:
- Compute the return on investment for each station
- Which station manager is doing best based only on ROI? Why?
- Are any of the stations in danger of being closed due to lack of performance?
- What other factors should be included when evaluating the managers?
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