Required:1. Compute the East Division's ROI for last year; also compute the ROI as it would appear if the new product line were added. (Do notround intermediate calculations. Round your final answer to the nearest whole number.)ROIPresentO AcceptReject%New Line2. If you were in Grenier's position, would you accept or reject the new product line?%Residual incomeTotal3. Why do you suppose headquarters is anxious for the East Division to add the new product line?Adding the new line would decrease the company's overall ROI.Adding the new line would increase the company's overall ROI.AcceptReject%4. Suppose that the company's minimum required rate of return on operating assets is 12% and that performance is evaluated usingresidual income.a. Compute East Division's residual income for last year, also compute the residual income as it would appear if the new product linewere added.PresentNew LineTotalb. Under these circumstances, if you were in Grenier's position, would you accept or reject the new product line? Faced with headquarters' desire to add a new product line, Stefan Grenier, manager of Bilti Products' East Division, felt that he had tosee the numbers before he made a move. His division's ROI has led the company for three years, and he doesn't want any letdown.Bilti Products is a decentralized wholesaler with four autonomous divisions. The divisions are evaluated on the basis of ROI, with year-end bonuses given to divisional managers who have the highest ROI. Operating results for the company's East Division for last yearare given below:SalesVariable expensesContribution marginFixed expensesOperating incomeDivisional operating assetsThe company had an overall ROI of 13% last year (considering all divisions). The new product line that headquarters wants Grenier'sEast Division to add would require an investment of $4,300,000. The cost and revenue characteristics of the new product line per yearwould be as follows:SalesVariable expensesFixed expenses$ 12,900,00060% of sales$30,100,00014,570,00015,530,00013,122,000$ 2,408,000$ 7,525,000$ 4,515,000

Return on investment (ROI) is a financial performance metric used to assess how effectively assets…

Required: 1. Compute the East Division's ROI for last year; also compute the ROI as it would appear if the new product line were added. (Do not round intermediate calculations. Round your final answer to the nearest whole number.) ROI Present Accept Reject % New Line 2. If you were in Grenier's position, would you accept or reject the new product line? % Residual income Total 3. Why do you suppose headquarters is anxious for the East Division to add the new product line? Adding the new line would decrease the company's overall ROI. O Adding the new line would increase the company's overall ROI. Accept Reject % 4. Suppose that the company's minimum required rate of return on operating assets is 12% and that performance is evaluated using residual income. a. Compute East Division's residual income for last year; also compute the residual income as it would appear if the new product line were added. Present New Line Total b. Under these circumstances, if you were in Grenier's position, would you accept or reject the new product line?

Required: 1. Compute the East Division's ROI for last year; also compute the ROI as it would appear if the new product line were added. (Do not round intermediate calculations. Round your final answer to the nearest whole number.) ROI Present Accept Reject % New Line 2. If you were in Grenier's position, would you accept or reject the new product line? % Residual income Total 3. Why do you suppose headquarters is anxious for the East Division to add the new product line? Adding the new line would decrease the company's overall ROI. O Adding the new line would increase the company's overall ROI. Accept Reject % 4. Suppose that the company's minimum required rate of return on operating assets is 12% and that performance is evaluated using residual income. a. Compute East Division's residual income for last year; also compute the residual income as it would appear if the new product line were added. Present New Line Total b. Under these circumstances, if you were in Grenier's position, would you accept or reject the new product line?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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