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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Question
Vikrambhai
Transcribed Image Text: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 >
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