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Orange Corp. has two divisions: Fruit and Flower. The following information for the past year is available for each division: Fruit Division Flower Division 2,610,000 1,957, 500 652,500 Sales revenue Cost of goods sold and operating expenses 1,740,000 1,392,000 348,000 Net operating income Average invested assets 3,480,000 2,718,750 Orange has established a hurdle rate of 6 percent Required: 1-a. Compute each division's return on investment (ROI) and residual income for last year. 1-b. Determine which manager seems to be performing better. 2. Suppose Orange is investing in new technology that will increase each division's operating income by $131,000. The total investment required is $2,200,000, which will be split evenly between the two divisions. Calculate the ROI and residual Income for each division after the investment is made. 3. Determine whether both managers will support the investment.

Orange Corp. has two divisions: Fruit and Flower. The following information for the past year is available for each division: Fruit Division Flower Division 2,610,000 1,957, 500 652,500 Sales revenue Cost of goods sold and operating expenses 1,740,000 1,392,000 348,000 Net operating income Average invested assets 3,480,000 2,718,750 Orange has established a hurdle rate of 6 percent Required: 1-a. Compute each division's return on investment (ROI) and residual income for last year. 1-b. Determine which manager seems to be performing better. 2. Suppose Orange is investing in new technology that will increase each division's operating income by $131,000. The total investment required is $2,200,000, which will be split evenly between the two divisions. Calculate the ROI and residual Income for each division after the investment is made. 3. Determine whether both managers will support the investment.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Saved Orange Corp. has two divisions: Fruit and Flower. The following information for the past year is available for each division: Fruit Division Flower Division Sales revenue Cost of goods sold and operating expenses 2$ 1,740,000 2,610,000 1,957,500 652,500 1,392,000 Net operating income $ 348,000 Average invested assets 3,480,000 2,718,750 Orange has established a hurdle rate of 6 percent Required: 1-a. Compute each division's return on investment (ROI) and residual income for last year. 1-b. Determine which manager seems to be performing better. 2. Suppose Orange is investing in new technology that will increase each division's operating Income by $131,000. The total investment required is $2,200,000, which will be split evenly between the two divisions Calculate the ROI and residual Income for each division after the investment is made. 3. Determine whether both managers will support the investment. Complete this question by entering your answers in the tabs below. Reg 1A Reg 1B Reg 2 Reg 3 Compute each division's return on investment (ROI) and residual income for last year. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.)) Fruit Division Flower Division ROI Residual Income (Loss) Reg 18 > ( Prey 5 of 12 Next > here to search f2 f3 2 3
Transcribed Image Text:Saved Orange Corp. has two divisions: Fruit and Flower. The following information for the past year is available for each division: Fruit Division Flower Division Sales revenue Cost of goods sold and operating expenses 2$ 1,740,000 2,610,000 1,957,500 652,500 1,392,000 Net operating income $ 348,000 Average invested assets 3,480,000 2,718,750 Orange has established a hurdle rate of 6 percent Required: 1-a. Compute each division's return on investment (ROI) and residual income for last year. 1-b. Determine which manager seems to be performing better. 2. Suppose Orange is investing in new technology that will increase each division's operating Income by $131,000. The total investment required is $2,200,000, which will be split evenly between the two divisions Calculate the ROI and residual Income for each division after the investment is made. 3. Determine whether both managers will support the investment. Complete this question by entering your answers in the tabs below. Reg 1A Reg 1B Reg 2 Reg 3 Compute each division's return on investment (ROI) and residual income for last year. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.)) Fruit Division Flower Division ROI Residual Income (Loss) Reg 18 > ( Prey 5 of 12 Next > here to search f2 f3 2 3
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