n ROI, which division is more successful"
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Consider the following data (in millions) from Trident Financial Incorporated, which has two main divisions, mortgage loans and
consumer loans:
Mortgage
Consumer
Loans
Loans
Average total assets
Operating income
Return on investment (ROI)
$ 2,500
$ 530
$ 17,750
$ 2,485
21.20%
14.00%
Required:
1. Based on ROI, which division is more successful?
Mortgage loans
Consumer loans
2. Trident uses residual income (RI) as a measure of the financial performance of its divisions. What is the RI for each division if the
minimum desired rate of return is (a) 10%, (b) 15%, and (c) 20%? (Leave no cells blank. Negative amounts should be indicated by a
minus sign. Enter your answers in millions.)
Residual Income (RI)
Mortgage
Loans
Consumer
Loans
(а) 10%
|(b) 15%
(c) 20%
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