Houghton Chemicals, which started operations one year ago, has two divisions: Alloys and Petro. Both divisions invest heavily in R&D, which is assumed to generate benefits for five years. R&D spending is made uniformly throughout the year. Houghton Chemicals has a cost of capital of 11 percent. Selected financial information for the two divisions (in thousands of dollars) for the year just completed follows: Sales revenue Divisional income Divisional investment Current liabilities R&D Alloys $ 9,100 Petro $ 7,200 947 1,115 7,250 330 8,700 370 370 470 Required: Evaluate the performance of the two divisions assuming Houghton uses return on investment (ROI). Note: Enter your answers as a percentage rounded to 2 decimal places (i.e., 32.13). ROI of Alloys division ROI of Petro division Which division performed better? % %
Houghton Chemicals, which started operations one year ago, has two divisions: Alloys and Petro. Both divisions invest heavily in R&D, which is assumed to generate benefits for five years. R&D spending is made uniformly throughout the year. Houghton Chemicals has a cost of capital of 11 percent. Selected financial information for the two divisions (in thousands of dollars) for the year just completed follows: Sales revenue Divisional income Divisional investment Current liabilities R&D Alloys $ 9,100 Petro $ 7,200 947 1,115 7,250 330 8,700 370 370 470 Required: Evaluate the performance of the two divisions assuming Houghton uses return on investment (ROI). Note: Enter your answers as a percentage rounded to 2 decimal places (i.e., 32.13). ROI of Alloys division ROI of Petro division Which division performed better? % %
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Houghton Chemicals, which started operations one year ago, has two divisions: Alloys and Petro. Both divisions invest heavily in R&D,
which is assumed to generate benefits for five years. R&D spending is made uniformly throughout the year. Houghton Chemicals has a
cost of capital of 11 percent. Selected financial information for the two divisions (in thousands of dollars) for the year just completed
follows:
Sales revenue
Divisional income
Divisional investment
Current liabilities
R&D
Alloys
$ 9,100
Petro
$ 7,200
947
1,115
7,250
330
8,700
370
370
470
Required:
Evaluate the performance of the two divisions assuming Houghton uses return on investment (ROI).
Note: Enter your answers as a percentage rounded to 2 decimal places (i.e., 32.13).
ROI of Alloys division
ROI of Petro division
Which division performed better?
%
%
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