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Business, 06.05.2020 19:16 dragongacha777

Selected sales and operating data for three divisions of different structural engineering firms are given as follows :

Division A Division B Division C
Sales $5,800,000 $9,800,000 $8,900,000
Average operating assets $1,450,000 $4,900,000 $2,225,000
Net operating income $284,200 $872,200 $191,350
Minimum required rate of return 18.00% 17.80% 15.00%
1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. (Round your Turnover answers to 2 decimal places. Round your Margin and ROI percentage answers to 2 decimal places (i. e., 0.1234 should be entered as 12.34).)

Margin Turnover ROI
Division A _% __ %
Division B _% __ %
Division C _% __ %
2. Compute the residual income (loss) for each division. (Loss amounts should be indicated by a minus sign. Round your Required Rate of Return percentage answers to 2 decimal places (i. e., 0.1234 should be entered as 12.34).)

Division A Division B Division C
Avg operating Assets _ _
Required Rate of Return % % _%
Required Operating Income _ __ __
Actual Operating Income _ _ _
Required Operating Income (above) _ __
Residual Income (loss) _ _
3. Assume that each division is presented with an investment opportunity that would yield a 20% rate of return.

a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity?

Division A

Division B

Division C

b. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity?

Division A

Division B

Division C

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