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. Income $ 2,916,000 2,074,000 Average Assets $ 16,200,000 12,200,000 Investment Center Electronics Sporting goods Sales. $ 40,500,000 20,740,000 Exercise 9-10 (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 11% 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 15% return on investment. Should the new investment opportunity be accepted? The target return is 11%.
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. Income $ 2,916,000 2,074,000 Average Assets $ 16,200,000 12,200,000 Investment Center Electronics Sporting goods Sales. $ 40,500,000 20,740,000 Exercise 9-10 (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 11% 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 15% return on investment. Should the new investment opportunity be accepted? The target return is 11%.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
Vijay
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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.
Average Assets
$ 16,200,000
12,200,000
Investment Center
Electronics
Sporting goods
Sales
Income
$ 40,500,000 $ 2,916,000
20,740,000
2,074,000
Exercise 9-10 (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 11% 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 15% return on investment. Should
the new investment opportunity be accepted? The target return is 11%.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F266fc484-5c67-47d6-992b-66fccc5361b4%2F3ace8bed-a4b0-4129-bb76-ff676c4e1040%2Fhynoxqb_processed.jpeg&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.
Average Assets
$ 16,200,000
12,200,000
Investment Center
Electronics
Sporting goods
Sales
Income
$ 40,500,000 $ 2,916,000
20,740,000
2,074,000
Exercise 9-10 (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 11% 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 15% return on investment. Should
the new investment opportunity be accepted? The target return is 11%.
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