Megamart provides the following information on its two investment centers. Sales Investment Center Electronics Sporting goods $ 44,250,000 24,660,000 Income $ 3,363,000 2,466,000 Average Assets $ 17,700,000 13,700,000 cise 22-10 (Algo) Computing return on investment and residual income; investing decision Compute return on investment for each center. Using return on investment, which center is most efficient at using as generate income? Assume a target income of 10% of average assets. Compute residual income for each center. Which center generate residual income? Assume the Electronics center is presented with a new investment opportunity that will yield a 14% return on investm the new investment opportunity be accepted? The target return is 10%.
Megamart provides the following information on its two investment centers. Sales Investment Center Electronics Sporting goods $ 44,250,000 24,660,000 Income $ 3,363,000 2,466,000 Average Assets $ 17,700,000 13,700,000 cise 22-10 (Algo) Computing return on investment and residual income; investing decision Compute return on investment for each center. Using return on investment, which center is most efficient at using as generate income? Assume a target income of 10% of average assets. Compute residual income for each center. Which center generate residual income? Assume the Electronics center is presented with a new investment opportunity that will yield a 14% return on investm the new investment opportunity be accepted? The target return is 10%.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Required information
Use the following information for the Exercises below. (Algo)
[The following information applies to the questions displayed below.]
Megamart provides the following information on its two investment centers.
Sales
Investment Center
Electronics
Sporting goods
$ 44,250,000
24,660,000
Income
$ 3,363,000
2,466,000
Average Assets
$ 17,700,000
13,700,000
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 10% 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 10%.
Answer is not complete.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2 Required 3
Assume a target income of 10% of average assets. Compute residual income for each center. Which center generated the
most residual income?
Investment Center
Electronics
$
3,363,000
Sporting Goods
$
2,466,000
Income
Less target income
Residual income
Which center generated the most residual income?
Electronics
< Required 1
Required 3 >](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F17cd18a7-0eb3-4b70-8499-7019f4ec3e41%2F51748a9c-1c35-4488-82b9-18ad4c50135f%2Fe7x1x5c_processed.png&w=3840&q=75)
Transcribed Image Text:!
Required information
Use the following information for the Exercises below. (Algo)
[The following information applies to the questions displayed below.]
Megamart provides the following information on its two investment centers.
Sales
Investment Center
Electronics
Sporting goods
$ 44,250,000
24,660,000
Income
$ 3,363,000
2,466,000
Average Assets
$ 17,700,000
13,700,000
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 10% 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 10%.
Answer is not complete.
Complete this question by entering your answers in the tabs below.
Required 1
Required 2 Required 3
Assume a target income of 10% of average assets. Compute residual income for each center. Which center generated the
most residual income?
Investment Center
Electronics
$
3,363,000
Sporting Goods
$
2,466,000
Income
Less target income
Residual income
Which center generated the most residual income?
Electronics
< Required 1
Required 3 >
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