Coolbrook Company has the following information available for the past year: River Division Stream Division Sales revenue $ 1,209,000 $ 1,810,000 Cost of goods sold and operating expenses 900,000 1,286,000 Net operating income $ 309,000 $ 524,000 Average invested assets $ 1,200,000 $ 1,460,000 The company’s hurdle rate is 6.26 percent. Required: 1. Calculate return on investment (ROI) and residual income for each division for last year. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.)) river steam ROI % % Residual income (loss) 2. Recalculate ROI and residual income for the division for each independent situation that follows: Operating income increases by 11 percent. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.). Loss amounts should be indicated with a minus sign.) river steam ROI Residual income (loss) a. Operating income increases by 11 percent. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.). Loss amounts should be indicated with a minus sign.) river steam ROI Residual income (loss) b. Operating income decreases by 11 percent. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.). Loss amounts should be indicated with a minus sign.) river steam ROI Residual income (loss) c. The company invests $249,000 in each division, an amount that generates $116,000 additional income per division. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.). Round your "Residual Income (Loss)" answer to the nearest whole dollars. Loss amounts should be indicated with a minus sign.) river steam ROI Residual income (loss) d. Coolbrook changes its hurdle rate to 4.26 percent. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.). Loss amounts should be indicated with a minus sign.) river steam ROI Residual income (loss)
Coolbrook Company has the following information available for the past year:
| River Division | Stream Division | ||||
| Sales revenue | $ | 1,209,000 | $ | 1,810,000 | |
| Cost of goods sold and operating expenses | 900,000 | 1,286,000 | |||
| Net operating income | $ | 309,000 | $ | 524,000 | |
| Average invested assets | $ | 1,200,000 | $ | 1,460,000 | |
The company’s hurdle rate is 6.26 percent.
Required:
1. Calculate
| river | steam | |
| ROI | % | % |
| Residual income (loss) |
2. Recalculate ROI and residual income for the division for each independent situation that follows: Operating income increases by 11 percent. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.). Loss amounts should be indicated with a minus sign.)
| river | steam | |
| ROI | ||
| Residual income (loss) |
a. Operating income increases by 11 percent. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.). Loss amounts should be indicated with a minus sign.)
| river | steam | |
| ROI | ||
| Residual income (loss) |
b. Operating income decreases by 11 percent. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.). Loss amounts should be indicated with a minus sign.)
| river | steam | |
| ROI | ||
| Residual income (loss) |
c. The company invests $249,000 in each division, an amount that generates $116,000 additional income per division. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.). Round your "Residual Income (Loss)" answer to the nearest whole dollars. Loss amounts should be indicated with a minus sign.)
| river | steam | |
| ROI | ||
| Residual income (loss) |
d. Coolbrook changes its hurdle rate to 4.26 percent. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.). Loss amounts should be indicated with a minus sign.)
| river | steam | |
| ROI | ||
| Residual income (loss) |
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