Required 1 Required 2 Required 3 Compute return on investment for each center. Using return on investment, which center is most efficient at using assets to generate income? Electronics Sporting Goods Return on Investment Numerator: / Denominator: / = Return on Investment = = Which center is most efficient at using assets to generate income? < Required 1 Required 2 > Megamart provides the following information on its two investment centers. Investment Center Electronics Sporting goods Sales $ 63,460,000 19,050,000 Income $ 3,173,000 2,286,000 Average Assets $ 16,700,000 12,700,000 Exercise 22-10 (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%.
Required 1 Required 2 Required 3 Compute return on investment for each center. Using return on investment, which center is most efficient at using assets to generate income? Electronics Sporting Goods Return on Investment Numerator: / Denominator: / = Return on Investment = = Which center is most efficient at using assets to generate income? < Required 1 Required 2 > Megamart provides the following information on its two investment centers. Investment Center Electronics Sporting goods Sales $ 63,460,000 19,050,000 Income $ 3,173,000 2,286,000 Average Assets $ 16,700,000 12,700,000 Exercise 22-10 (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%.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Transcribed Image Text:Required 1 Required 2 Required 3
Compute return on investment for each center. Using return on investment, which center is most efficient at using assets to
generate income?
Electronics
Sporting Goods
Return on Investment
Numerator:
/ Denominator:
/
=
Return on Investment
=
=
Which center is most efficient at using assets to generate income?
< Required 1
Required 2 >
Transcribed Image Text:Megamart provides the following information on its two investment centers.
Investment Center
Electronics
Sporting goods
Sales
$ 63,460,000
19,050,000
Income
$ 3,173,000
2,286,000
Average Assets
$ 16,700,000
12,700,000
Exercise 22-10 (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%.
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