The Central Division of Wellington Company has a return on investment (ROI) of 12.0%, using assets of $66,000. If the residual income was $2,640, what was the division's cost of capital? (Ignore tax.) Multiple Choice 8.0% None of these. 4.8% 12.0% 24.0%
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The Central Division of Wellington Company has a
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8.0%
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None of these.
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4.8%
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12.0%
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24.0%
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- Determining missing items in return and residual income computations Data for Uberto Company are presented in the following table of returns on investment and residual incomes: Invested Assets Income from Operations Return on Investment Minimum Return Minimum Acceptable Income from Operations Residual Income $890,000 $231,400 (a) 15% (b) (c) $460,000 (d) (e) (f) $50,600 $23,000 $310,000 (g) 14% (h) $31,000 (i) $230,000 $48,300 (j) 12% (k) (l) Determine the missing values, identified by the letters above. For all amounts, round to the nearest whole number. a. % b. c. d. e. % f. % g. h. % i. j. % k. l.Estate has an ROI of 19.4% based on revenues of $570,000. The residual income is $19,950 and the investment turnover is 2. What is the hurdle rate? Multiple Choice 19.40% 24.80% 9.70% 12.40%a. Compute ROI for Division A.b. Compute residual income for Division B.c. Division A could increase its profit by $40,000 by increasing its investment by $150,000. Computeits total residual income.d. Division A could increase its return on sales by one percentage point, while keeping the same totalsales and investment. Compute its ROI.e. Division B could reduce its investment so that its asset turnover increased by one time, whileholding total sales constant. Compute its ROI.
- a. Compute ROI for Division B.b. Compute residual income for Division A.c. Division B could increase its profit by $80,000 by increasing its investment by $300,000. Computeits total residual income. d. Division A could increase its return on sales by one percentage point, while keeping the same totalsales. Compute its ROI.e. Division A could increase its sales so that its asset turnover increased by one time, while holdingtotal assets constant. Compute its ROI.The following data are available for two divisions of Ryan Enterprises: Alpha Division Beta Division Division operating profit $ 7,360,000 $ 1,240,000 Division investment 32,160,000 3,160,000 The cost of capital for the company is 7 percent. Ignore taxes. Required: a-1. Calculate the ROI for both Alpha and Beta divisions. a-2. If Ryan measures performance using ROI, which division had the better performance? b-1. Calculate the EVA for both Alpha and Beta divisions. (The divisions have no current liabilities.) b-2. If Ryan measures performance using economic value added, which division had the better performance? c. Would your evaluation change if the company’s cost of capital was 10 percent, when evaluated by ROI? when evaluated by EVA?Margin, Turnover, Return on Investment Pelak Company had sales of $4,945,000, expenses of $4,566,000, and average operating assets of $3,690,000. Required: 1. Compute the operating income. $ 2. Compute the margin (as a percent) and turnover ratio. If required, round your answers to one decimal place. Margin Turnover % 3. Compute the ROI as a percent. Use the part 2 final answers in these calculations and round the final answer to two decimal places. %
- Supply the missing data for three service companies shown in the table below: Note: Loss amounts should be indicated by a minus sign. Round your percentage answers to nearest whole percent. Sales Net operating income Average operating assets Return on investment (ROI) Minimum required rate of return: Percentage Dollar amount Residual income A Company B C $ 9,450,000 $ $ 7,750,000 329,000 $ 5,175,000 $ 3,150,000 $ 2,070,000 11 % 14 % % 9% $ 376,000 % 14 % $ 103,500The 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 ProjectGiven the following data: $720,000 $ 51,840 $432,000 $250, 560 $188,800 Average operating assets Total liabilities Sales Contribution margin Net operating income Return on investment (ROI) is: Multiple Cholce 25.0% 15.0% 58.0% O 34.8%
- Kyle Corporation provides the following information for the Product Division and Service Division for the year. Product Division Service Division 420,000 $ 650,000 195,000 245,000 640,000 610,000 14.0% 14.0% Net sales Operating income Average total assets Target rate of return $ Requirement 1. Calculate the return on investment for each division. (Enter answers as a percent rounded to the nearest hundredth percent, X.XX%) The return on investment for the Product Division is The return on investment for the Service Division is Requirement 2. Which division has the highest ROI? % % Requirement 3. Calculate the residual income for each division. (Round answers to the nearest whole dollar.) The residual income for the Product Division is The residual income for the Service Division is Requirement 4. Which division has the highest residual income?Knowledge Check East Division of Blue Spruce Anchors provided the following information: Contribution margin Controllable margin Average operating assets Minimum rate of return Return on investment $890,000 $395,900 $2,140,000 Compute the return on investment and the residual income. (Round return on investment answer to two decimal places (e.g., 15.25%).) Residual income 9 % %Washington Company has two divisions: the Adams Division and the Jefferson Division. The following information pertains to last year's results: Adams Division Jefferson Division Net (after-tax) income $653,400 $330,750 Total capital employed 4,560,000 3,705,000 In addition, Washington Company's top management has set a minimum acceptable rate of return equal to 7%. Required: Enter negative values as negative numbers. 1. Calculate the residual income for the Adams Division. 2. Calculate the residual income for the Jefferson Division.
