Coolbrook Company has the following information available for the past year: River Division Stream Division Sales revenue $ 1,212,000 $1,812,000 Cost of goods sold and operating expenses 885,000 1,297,000 Net operating income $ 327,000 $ 515,000 Average invested assets $ 1,170,000 $ 1,470,000 The company's hurdle rate is 7.51 percent. Required: Calculate return on investment (ROI) and residual income for each division for last year. Recalculate ROI and residual income for each division for each independent situation that follows: Operating income increases by 12 percent. Operating income decreases by 8 percent. The company invests $250,000 in each division, an amount that generates $113,000 additional income per division. Coolbrook changes its hurdle rate to 5.51 percent.
Coolbrook Company has the following information available for the past year: River Division Stream Division Sales revenue $ 1,212,000 $1,812,000 Cost of goods sold and operating expenses 885,000 1,297,000 Net operating income $ 327,000 $ 515,000 Average invested assets $ 1,170,000 $ 1,470,000 The company's hurdle rate is 7.51 percent. Required: Calculate return on investment (ROI) and residual income for each division for last year. Recalculate ROI and residual income for each division for each independent situation that follows: Operating income increases by 12 percent. Operating income decreases by 8 percent. The company invests $250,000 in each division, an amount that generates $113,000 additional income per division. Coolbrook changes its hurdle rate to 5.51 percent.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Coolbrook Company has the following information available for the past year: River Division Stream
Division Sales revenue $ 1,212,000 $1,812,000 Cost of goods sold and operating expenses 885,000
1,297,000 Net operating income $ 327,000 $ 515,000 Average invested assets $ 1,170,000 $1,470,000
The company's hurdle rate is 7.51 percent. Required: Calculate return on investment (ROI) and residual
income for each division for last year. Recalculate ROI and residual income for each division for each
independent situation that follows: Operating income increases by 12 percent. Operating income
decreases by 8 percent. The company invests $250,000 in each division, an amount that generates
$113,000 additional income per division. Coolbrook changes its hurdle rate to 5.51 percent.
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