Question

Ex 9-10 Required information Use the following information for the Exercises below. [The following information applies to the questions displayed below.) Megamart, a retailer of consumer goods, provides the following information on two of its departments (each considered an investment center). Investment Center Electronics Sporting goods Sales $49.250.000 21,780,000 Income $3.059.000 2,178,000 Average Invested Assets $16,100,000 12,100,000 Exercise 09-10 Computing return on investment and residual income; investing decision LO A1 nces 1. Compute return on investment for each department. Using return on investment, which department is most efficient at using assets to generate returns for the company? 2. Assume a target income level of 10% of average invested assets. Compute residual income for each department. Which department generated the most residual income for the company? 3. Assume the Electronics department is presented with a new investment opportunity that will yield a 14% return on investment. Should the new investment opportunity be accepted? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute return on investment for each department. Using return on investment, which department is most efficient at using assets to generate returns for the company? Return on Investment 7 Choose Denominator: Choose Numerator: = Return on Investment Return on Investment Electronics Sporting Goods Which department is most efficient at using assets to generate returns for the company? Required 1 Required 2 >

Answer 1

Net income Aveg Invested Assets Electronics Sporting Goods 3059000 2178000 16100000 12100000 1.) Return on investmnet Choose Numerator : Choose Denominator Net income Average Invested assets Return on investmnet 19.00% 18.00% Electronics Electronics 3059000 16100000 Sporting Goods 2178000 12100000 Which Department is most efficient at using assets to generate returns for the Company 2.) Calculation of Residula Income (with Minimum Return in 10%) Investement Center Electronics Sporting Goods Net income 3059000 2178000 Taeget Net income 1610000 1210000 Residula income 1449000 968000 Which Department is most efficient at Electronics using assets to generate returns for the 3) Assume a New investment with 14% Should the this Accepted ANSWER: NO ROI : operating income / operating assets Residula income: Operating income- Minimum required income