The Best Medical Supply Company has two divisions that operate independently of one another. The financial data for the year 2020 reported the following results: North South Sales Operating income Invested capital P300,000,000 75,000,000 600,000,000 P250,000,000 55,000,000 500,000,000 The company's desired rate of return is 10%. What are the respective residual incomes for the North and South Divisions? P15,000,000 and P5,000,000

The Best Medical Supply Company has two divisions that operate independently of one another. The financial data for the year 2020 reported the following results: North South Sales Operating income Invested capital P300,000,000 75,000,000 600,000,000 P250,000,000 55,000,000 500,000,000 The company's desired rate of return is 10%. What are the respective residual incomes for the North and South Divisions? P15,000,000 and P5,000,000

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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Wescott Company has three divisions: A, B, and C. The company has a hurdle rate of 8 percent. Selected operating data for the three divisions are as follows: Sales revenue Cost of goods sold Miscellaneous operating expenses Interest and taxes Average invested assets Wescott is considering an expansion project in the upcoming year that will cost $5.7 million and return $521,000 per year. The project would be implemented by only one of the three divisions. Complete this question by entering your answers in the tabs below. Req 1 Required: 1. Compute the ROI for each division. 2. Compute the residual income for each division. 3. Rank the divisions according to the ROI and residual income of each. 4-a. Compute the return on investment on the proposed expansion project. 4-b. Is this an acceptable project? 5. Without any additional calculations, state whether the proposed project would increase or decrease each division's ROI. 6. Compute the new ROI and residual income for each division if…
Solano Company has sales of $840,000, cost of goods sold of $540,000, other operating expenses of $70,000, average invested assets of $2,450,000, and a hurdle rate of 11 percent. Required: Determine Solano's return on investment (ROI), investment turnover, profit margin, and residual income. Several possible changes that Solano could face in the upcoming year follow. Determine each scenario's impact on Solano's ROI and residual income. (Note: Treat each scenario independently.) Company sales and cost of goods sold increase by 40 percent. Operating expenses decrease by $12,000. Operating expenses increase by 10 percent. Average invested assets increase by $470,000. Solano changes its hurdle rate to 17 percent.
The Commercial Division of Lobo Company has operating income of $12,680,000 and assets of $80,500,000. The minimum acceptable return on assets is 15%. What is the residual income for the division?
The Western Division of Claremont Company had net operating income of $148,000 and average invested assets of $558,000. Claremont has a required rate of return of 13.00 percent. Western has an opportunity to increase operating income by $40,000 with a $85,000 investment in assets. Compute Western Division's return on investment and residual income currently and if it undertakes the project. Note: Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%). Round your Residual Income (Loss) answers to the nearest whole dollar. Return on Investment (ROI) Residual Income (Loss) Current Proposed Project %
If operating income is P60,000, average operating assets are P240,000, and the minimum required rate of return is 20%, what is the residual income? 50% 25% P12,000 P45,000
A
Roy Toys, a division of Fun Corp. has a net operating income of $60,000 and average operating assets of $300000. 1. The required rate of return for the company is 15%. What is the division's ROI?a. 25%b. 5%c. 15%d. 20% 2. If the manager of the division is evaluated based on ROI, will she want to make an investment of $100000 that would generate an additional net operating income of $18000 per year?a. Yesb. No
I will post this several times, dont answer it if you already answer it! I will mark down the second SAME answer if ever.
The Western Division of Claremont Company had net operating income of $154,000 and average invested assets of $557,000. Claremont has a required rate of return of 14.75 percent. Western has an opportunity to increase operating income by $48,000 with a $84,000 investment in assets. Compute Western Division's return on investment and residual income currently and if it undertakes the project. Note: Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%). Round your Residual Income (Loss) answers to the nearest whole dollar. Return on Investment (ROI) Residual Income (Loss) Current % Proposed Project
One segment of D's Company has the following data: Operating assets of ₱5,000,000; Operating income of ₱750,000. Moreover, the company has a required target ROI of 14% for the said segment Compute the segment's ROI for the year. Assuming that operating assets for the next year increase by 10%. How much would operating income have to increase to reach the target?
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Waffle Fries are Heavenly (WFH) has the following financial information for the previous year of operations: Operating income $128,000 Invested assets $800,000 Sales $296,000 WFH has internally set the minimum acceptable rate of return as 15%. Based on the information provided, what is the residual income? Waffle Fries are Heavenly (WFH) has the following financial information for the previous year of operations: Operating income $128,000 Invested assets $800,000 Sales $296,000 WFH has internally set the minimum acceptable rate of return as 15%. Based on the information provided, what is the residual income? $8,000 $83,600 $176 $128,000

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