Chapter 10 Homework 10 Sales Average operating assets Net operating income Minimum required rate of return Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division B $ 14,700,000 $ 7,350,000 $588,000 Division C $26,250,000 $ 5,250,000 $ 840,000 16% Req 1 Reg 2 Required: 1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. 2. Compute the residual income (loss) for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 15% rate of return. a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity? b. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity Residual income (loss) Check my work mode: This shows what is correct or incorrect for the work you have co Complete this question by entering your answers in the tabs below. Req 3A Division A 0 $ Division A $ 12,600,000 $3,150,000 $630,000 X Answer is complete but not entirely correct. 14% Req 3B Compute the residual income (loss) for each division. (Do not round intermediate calculations. Loss amounts should be indicated by a minus sign.) $ Division B 10% < Req 1 Saved Division C 0 Req 3A >
Chapter 10 Homework 10 Sales Average operating assets Net operating income Minimum required rate of return Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division B $ 14,700,000 $ 7,350,000 $588,000 Division C $26,250,000 $ 5,250,000 $ 840,000 16% Req 1 Reg 2 Required: 1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. 2. Compute the residual income (loss) for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 15% rate of return. a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity? b. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity Residual income (loss) Check my work mode: This shows what is correct or incorrect for the work you have co Complete this question by entering your answers in the tabs below. Req 3A Division A 0 $ Division A $ 12,600,000 $3,150,000 $630,000 X Answer is complete but not entirely correct. 14% Req 3B Compute the residual income (loss) for each division. (Do not round intermediate calculations. Loss amounts should be indicated by a minus sign.) $ Division B 10% < Req 1 Saved Division C 0 Req 3A >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Chapter 10 Homework
10
Sales
Average operating assets
Net operating income
Minimum required rate of return
Selected sales and operating data for three divisions of different structural engineering firms are given as follows:
Division B
$ 14,700,000
$ 7,350,000
$588,000
Division C
$26,250,000
$ 5,250,000
$ 840,000
16%
Req 1
Reg 2
Required:
1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover.
2. Compute the residual income (loss) for each division.
3. Assume that each division is presented with an investment opportunity that would yield a 15% rate of return.
a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity?
b. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity
Residual income (loss)
Check my work mode: This shows what is correct or incorrect for the work you have co
Complete this question by entering your answers in the tabs below.
Req 3A
Division A
0
$
Division A
$ 12,600,000
$3,150,000
$630,000
X Answer is complete but not entirely correct.
14%
Req 3B
Compute the residual income (loss) for each division. (Do not round intermediate calculations. Loss amounts should be
indicated by a minus sign.)
$
Division B
10%
< Req 1
Saved
Division C
0
Req 3A >
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