(b) * Your answer is incorrect. How much would each division need to generate in new operating income in the fourth quarter to reach the company's desire ROI of 12% at year-end, assuming each division uses its available $54,000 to purchase a new investment? Assume it is a $54,0 nondepreciable asset but still included in operating assets. Fourth quarter operating income needed East 102480 West 66480
(b) * Your answer is incorrect. How much would each division need to generate in new operating income in the fourth quarter to reach the company's desire ROI of 12% at year-end, assuming each division uses its available $54,000 to purchase a new investment? Assume it is a $54,0 nondepreciable asset but still included in operating assets. Fourth quarter operating income needed East 102480 West 66480
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:(b)
* Your answer is incorrect.
How much would each division need to generate in new operating income in the fourth quarter to reach the company's desired
ROI of 12% at year-end, assuming each division uses its available $54,000 to purchase a new investment? Assume it is a $54,000
nondepreciable asset but still included in operating assets.
Fourth quarter operating income needed $
East
102480
West
66-480
Transcribed Image Text:It is the end of the third quarter, and Margaret is evaluating the performance of two key divisions in the company. Both divisions had
$54,000 cash available for investment in the fourth quarter, so Margaret is now analyzing each division before a potential investment.
She has gathered the following condensed income statements and selected information from the balance sheet for each division. The
company's minimum required rate of return is 10%, while its weighted average cost of capital is 9%. Its effective tax rate is 25%
Sales
COGS
Gross margin
Operating expenses
Operating income
Operating assets
Total assets
Current liabilities
East
$830,000
440,000
$390,000
344,000
$46,000
West
$1,300,000
760,000
$540,000
494,000
$46,000
$800,000 $500,000
$1,100,000 $740,000
$170,000
$54,000
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