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Company divisions are as follows: isions. A, B, Sales revenue Cost of goods sold Miscellaneous operating expenses Interest and taxes Average invested assets company has a Division A $ 1,305,000 806,000 74,000 58,000 10,030,000 rcent. Selected operating Required: 1. Compute the ROI for each division. 2. Compute the residual income for each division. 3. Rank the divisions according to the ROI and residual income of each. Division B $ 1,110,000 815,000 62,000 51,000 2,400,000 Division C $ 1,118,000 812,000 63,000 51,000 3,947,000 the three Wescott is considering an expansion project in the upcoming year that will cost $6.2 million and return $554,000 per year. The project would be implemented by only one of the three divisions.

Company divisions are as follows: isions. A, B, Sales revenue Cost of goods sold Miscellaneous operating expenses Interest and taxes Average invested assets company has a Division A $ 1,305,000 806,000 74,000 58,000 10,030,000 rcent. Selected operating Required: 1. Compute the ROI for each division. 2. Compute the residual income for each division. 3. Rank the divisions according to the ROI and residual income of each. Division B $ 1,110,000 815,000 62,000 51,000 2,400,000 Division C $ 1,118,000 812,000 63,000 51,000 3,947,000 the three Wescott is considering an expansion project in the upcoming year that will cost $6.2 million and return $554,000 per year. The project would be implemented by only one of the three divisions.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Wescott Company has three divisions: A, B, and C. The company has a hurdle rate of 8 percent. Selected operating data for the three divisions are as follows: Sales revenue Cost of goods sold Miscellaneous operating expenses Interest and taxes Average invested assets Required: 1. Compute the ROI for each division. 2. Compute the residual income for each division. 3. Rank the divisions according to the ROI and residual income of each. Wescott is considering an expansion project in the upcoming year that will cost $6.2 million and return $554,000 per year. The project would be implemented by only one of the three divisions. 4-a. Compute the return on investment on the proposed expansion project. 4-b. Is this an acceptable project? Complete this question by entering your answers in the tabs below. Req 1 5. Without any additional calculations, state whether the proposed project would increase or decrease each division's ROI. 6. Compute the new ROI and residual income for each division if the project was implemented within that division. Req 2 Division A Division B Division C Division A $ 1,305,000 806,000 74,000 58,000 10,030,000 Req 3 ROI (3.37) % % % Req 4A Residual Income (Loss) (3) $ < Req 5 Req 4B Division B $ 1,110,000 815,000 62,000 51,000 2,400,000 Req 5 Compute the new ROI and residual income for each division if the project was implemented within that division. Note: Loss amounts should be entered with a minus sign. Enter your ROI percentage answers to 2 decimal places, (i.e., 0.1234 should be entered as 12.34%.). Enter your answers in whole dollars not in millions. Division C $ 1,118,000 812,000 63,000 51,000 3,947,000 Req 6 > Req 6
Transcribed Image Text:Wescott Company has three divisions: A, B, and C. The company has a hurdle rate of 8 percent. Selected operating data for the three divisions are as follows: Sales revenue Cost of goods sold Miscellaneous operating expenses Interest and taxes Average invested assets Required: 1. Compute the ROI for each division. 2. Compute the residual income for each division. 3. Rank the divisions according to the ROI and residual income of each. Wescott is considering an expansion project in the upcoming year that will cost $6.2 million and return $554,000 per year. The project would be implemented by only one of the three divisions. 4-a. Compute the return on investment on the proposed expansion project. 4-b. Is this an acceptable project? Complete this question by entering your answers in the tabs below. Req 1 5. Without any additional calculations, state whether the proposed project would increase or decrease each division's ROI. 6. Compute the new ROI and residual income for each division if the project was implemented within that division. Req 2 Division A Division B Division C Division A $ 1,305,000 806,000 74,000 58,000 10,030,000 Req 3 ROI (3.37) % % % Req 4A Residual Income (Loss) (3) $ < Req 5 Req 4B Division B $ 1,110,000 815,000 62,000 51,000 2,400,000 Req 5 Compute the new ROI and residual income for each division if the project was implemented within that division. Note: Loss amounts should be entered with a minus sign. Enter your ROI percentage answers to 2 decimal places, (i.e., 0.1234 should be entered as 12.34%.). Enter your answers in whole dollars not in millions. Division C $ 1,118,000 812,000 63,000 51,000 3,947,000 Req 6 > Req 6
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