Megamart provides the following information on its two investment centers. Investment Center Electronics Sporting goods Sales $ 34,200,000 16,768,000 Income $ 2,907,000 2,096,000 Average Assets $ 17,100,000 13,100,000 Exercise 9-10 (Algo) Computing return on investment and residual income; investing decision LO A1 1. Compute return on investment for each center. Using return on investment, which center is most efficient at using assets to generate income? 2. Assume a target income of 12% of average assets. Compute residual income for each center. Which center generated the most residual income? 3. Assume the Electronics center is presented with a new investment opportunity that will yield a 14% return on investment. Should the new investment opportunity be accepted? The target return is 12%. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Assume a target income of 12% of average assets. Compute residual income for each center. Which center generated the most residual income? Income Investment Center Electronics Residual income Which center generated the most residual income? Sporting Goods < Required 1 Required 3 >
Megamart provides the following information on its two investment centers. Investment Center Electronics Sporting goods Sales $ 34,200,000 16,768,000 Income $ 2,907,000 2,096,000 Average Assets $ 17,100,000 13,100,000 Exercise 9-10 (Algo) Computing return on investment and residual income; investing decision LO A1 1. Compute return on investment for each center. Using return on investment, which center is most efficient at using assets to generate income? 2. Assume a target income of 12% of average assets. Compute residual income for each center. Which center generated the most residual income? 3. Assume the Electronics center is presented with a new investment opportunity that will yield a 14% return on investment. Should the new investment opportunity be accepted? The target return is 12%. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Assume a target income of 12% of average assets. Compute residual income for each center. Which center generated the most residual income? Income Investment Center Electronics Residual income Which center generated the most residual income? Sporting Goods < Required 1 Required 3 >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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