M10-10 (Algo) Impact of New Investment on ROI, Residual Income [LO 10-4, 10-5] The Western Division of Claremont Company had net operating income of $135,000 and average invested assets of $557,000. Claremont has a required rate of return of 14.50 percent. Western has an opportunity to increase operating income by $40,000 with a $100,000 investment in assets. Compute Western Division's return on investment and residual income currently and if it undertakes the project. Note: 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) answers to the nearest whole dollar. Return on Investment (ROI) Residual Income (Loss) Current % Proposed Project %

M10-10 (Algo) Impact of New Investment on ROI, Residual Income [LO 10-4, 10-5] The Western Division of Claremont Company had net operating income of $135,000 and average invested assets of $557,000. Claremont has a required rate of return of 14.50 percent. Western has an opportunity to increase operating income by $40,000 with a $100,000 investment in assets. Compute Western Division's return on investment and residual income currently and if it undertakes the project. Note: 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) answers to the nearest whole dollar. Return on Investment (ROI) Residual Income (Loss) Current % Proposed Project %

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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2. The Gustavo Industries in São Paulo, Brazil, reported the following results for 2020 (currency in Brazilian real, R$):« Sales R$ 400,000,000- 320,000,000- 40,800,000- 280,000,000- Variable costs Controllable fixed costs Average operating assets Gustavo's Management is considering the following independent courses of action in 2021 in order to maximize the return on investment for this division: Option1: Reduce average operating assets by R$ 80,000,000 with no change in controllable margin. Option2: Increase sales R$ 80,000,000 with no change in the contribution margin percentage. A. Compute the controllable margin and the return on investment for 2020. (25%)- B. Compute the controllable margin and the expected return on investment for each proposed option. (25%)-
1. If Department B is able to reduce its operating assets by $100,000, Department B's new ROI would be 2. If Department A is able to increase its controllable margin by $60,000 as a result of reducing variable costs, Department A's new ROI would be
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Residual Income
calculate all the missing values a, b, c, d, e, f, g, and h. Madison Corp. has a hurdle rate/required rate of return of 9%. Operating Average income (c) Total assets $115,000 $800,000 (a) (f) $175,000 (e) Return on Residual investment income (ROI) $1,350,000 17% $46,800 (h) $750,000 (g) 13% (RI) (b) (d) $31,000 $36,000 ?
Exercise 25.11 (Static) Using ROI and EVA for Performance Evaluation (LO25-2, LO25-3, LO25-4) Easton's Fabric Division has assets of $980,000, current liabilities of $130,000, and net operating income of $196,000. a. What is the Fabric Division's ROI? b. If the weighted-average cost of capital is 15 percent, what is the division's EVA? c. Which is the better technique to measure performance? Complete this question by entering your answers in the tabs below. Required A Required B Required C What is the Fabric Division's ROI? ROI RecuiccA Required B > 3 of 5
Using the following data, estimate the new Return on Investment if there is a 11% decrease in the average operating assets - with the new average operating assets as the base. Sales $2,565,862 Contribution margin 48% Controllable fixed costs 293,294 Average operating assets $4,671,197 Round to two decimal places. Be sure to enter the answer as a percentage but do not include the % sign.
Concord Company earned a controllable margin of $125000 on sales of $1607000. The division had average operating assets of $1293000. The company requires a return on investment of at least 7%. How much is residual income? O $34490 O $159490 O $90510 O $112490
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