Fanning Technologies, Inc. has three divisions. Fanning has a desired rate of return of 12.5 percent. The operating assets and income for each division are as follows: Divisions Printer Copier Fax Total Divisions Printer Copier Fax Operating Assets $ 590,000 860,000 410,000 $1,860,000 Fanning headquarters has $125,000 of additional cash to invest in one of its divisions. The division managers have identified Investment opportunities that are expected to yield the following ROIS: Required Operating Income $100,890 98,900 59,040 $258,830 Expected ROIs for Additional Investments 14.0% 13.0% 12.0% a-1. Calculate the ROI for each division. a-2. Which division manager is currently producing the highest ROI? b. Based on ROI, which division manager would be most eager to accept the $125,000 of investment funds? c. Based on ROI, which division manager would be least likely to accept the $125,000 of Investment funds? d. Which division offers the best investment opportunity for Fanning? g. Calculate the residual income: (1) At the corporate (headquarters) level before the additional Investment. (2) At the division level before the additional investment. (3) At the Investment level. (4) At the division level after the additional Investment.
Fanning Technologies, Inc. has three divisions. Fanning has a desired rate of return of 12.5 percent. The operating assets and income for each division are as follows: Divisions Printer Copier Fax Total Divisions Printer Copier Fax Operating Assets $ 590,000 860,000 410,000 $1,860,000 Fanning headquarters has $125,000 of additional cash to invest in one of its divisions. The division managers have identified Investment opportunities that are expected to yield the following ROIS: Required Operating Income $100,890 98,900 59,040 $258,830 Expected ROIs for Additional Investments 14.0% 13.0% 12.0% a-1. Calculate the ROI for each division. a-2. Which division manager is currently producing the highest ROI? b. Based on ROI, which division manager would be most eager to accept the $125,000 of investment funds? c. Based on ROI, which division manager would be least likely to accept the $125,000 of Investment funds? d. Which division offers the best investment opportunity for Fanning? g. Calculate the residual income: (1) At the corporate (headquarters) level before the additional Investment. (2) At the division level before the additional investment. (3) At the Investment level. (4) At the division level after the additional Investment.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
3
Transcribed Image Text:Fanning Technologies, Inc. has three divisions. Fanning has a desired rate of return of 12.5 percent. The operating assets and income
for each division are as follows:
Divisions
Printer
Copier
Fax
Total
Divisions
Printer
Copier
Fax
Operating
Assets
$ 590,000
860,000
410,000
$1,860,000
Fanning headquarters has $125,000 of additional cash to invest in one of its divisions. The division managers have identified
Investment opportunities that are expected to yield the following ROIS:
Required
Operating
Income
$100,890
98,900
59,040
$258,830
Expected ROIs for
Additional Investments
14.0%
13.0%
12.0%
a-1. Calculate the ROI for each division.
a-2. Which division manager is currently producing the highest ROI?
b. Based on ROI, which division manager would be most eager to accept the $125,000 of investment funds?
c. Based on ROI, which division manager would be least likely to accept the $125,000 of Investment funds?
d. Which division offers the best investment opportunity for Fanning?
g. Calculate the residual income:
(1) At the corporate (headquarters) level before the additional Investment.
(2) At the division level before the additional investment.
(3) At the Investment level.
(4) At the division level after the additional Investment.
AI-Generated Solution
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
Unlock instant AI solutions
Tap the button
to generate a solution
Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education