Handle Fabrication is a division of a major corporation. Last year the division had total sales of $21,900,000, net operating income of $2,100,000 and average operating assets of $6,500,000. The company's minimum required rate of return is 10%. 1. The division manager wants to invest in additional delivery trucks in an effort to increase sales. The trucks would cost $650,000. The manager estimates that the additional trucks will increase distribution and therefore increase operating income by $50,000. What would be the division's return on investment after making this investment? 2. Assume that a manager would only receive her bonus if her division achieves an ROI of 27% or more. If the manager's performance were judged based on ROI, would she invest in the additional trucks? Yes or no. Enter your answers in the same order as above. A/

Handle Fabrication is a division of a major corporation. Last year the division had total sales of $21,900,000, net operating income of $2,100,000 and average operating assets of $6,500,000. The company's minimum required rate of return is 10%. 1. The division manager wants to invest in additional delivery trucks in an effort to increase sales. The trucks would cost $650,000. The manager estimates that the additional trucks will increase distribution and therefore increase operating income by $50,000. What would be the division's return on investment after making this investment? 2. Assume that a manager would only receive her bonus if her division achieves an ROI of 27% or more. If the manager's performance were judged based on ROI, would she invest in the additional trucks? Yes or no. Enter your answers in the same order as above. A/

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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