Current Residual Income | ||||||
Present Income | $ 10,92,000 | |||||
($8400000*13%) | ||||||
Less: | ||||||
Target ROI | $ 7,56,000 | |||||
($8400000*9%) | ||||||
Therefore, Residual Income | $ 3,36,000 | |||||
Revised Residual Income | ||||||
Revised Income | $ 17,08,000.00 | |||||
($8400000+5600000)*12.20% | ||||||
Less: | ||||||
Target ROI | $ 12,60,000 | |||||
($8400000+5600000)*9% | ||||||
Therefore, Residual Income | $ 4,48,000 | |||||
Since there is an increase in residual income | ||||||
Monarch Division should make investment | YES | |||||
Feel Free To Discuss Queries. Please Rate | ||||||
the monarch division Exercise 15-17 Comparing return on investment with residual income LO 15-6, 15-7 The...
Exercise 15-17 Comparing return on investment with residual income LO 15-6, 15-7 The Monarch Division of Allgood Corporation has a current ROI of 11 percent. The company target ROI is 7 percent. The Monarch Division has an opportunity to invest $4,900,000 at 9 percent but is reluctant to do so because its ROI will fall to 10.30 percent. The present investment base for the division is $9,100,000. Required a. Calculate the current residual income and the residual income with the...
Exercise 9-12A Comparing return on investment with residual income LO 9-2, 9-3 The Monarch Division of Allgood Corporation has a current ROI of 11 percent. The company target ROI is 7 percent. The Monarch Division has an opportunity to invest $4,500,000 at 9 percent but is reluctant to do so because its ROI will fall to 10.25 percent. The present investment base for the division is $7,500,000. Required a. Calculate the current residual income and the residual income with the...
Problem 15-23 Comparing return on investment and residual income Helena Corporation operates three investment centers. The following financial statements apply to the investment center named Bowman Division. BOWMAN DIVISION Income Statement For the Year Ended December 31,2018 138,000 78,000 60,000 Sales revenue Cost of goods sold Gross margin Operating expenses Selling expenses Depreciation expense (6,000) 8.000) 46,000 Operating income Nonoperating item Loss on sale of land Net income (16,000) 30,000 BOWMAN DIVISION Balance Sheet As of December 31, 2018 Assets...
M10-10 (Algo) Impact of New Investment on ROI, Residual Income [LO 10-4, 10-5) The Western Division of Claremont Company had net operating income of $149,000 and average invested assets of $550,000 Claremont has a required rate of return of 13.00 percent. Western has an opportunity to increase operating income by $45,000 with a $100,000 investment in assets. Compute Western Division's return on investment and residual income currently and if it undertakes the project. (Enter your ROI answers as a percentage...
ROI and Residual Income: Impact of a New Investment The Mustang Division of Detroit Motors had an operating income of $700,000 and net assets of $4,000,000. Detroit Motors has a target rate of return of 16 percent. (a) Compute the return on investment. (Round your answer to three decimal places.) (b) Compute the residual income. (c) The Mustang Division has an opportunity to increase operating income by $200,000 with an $950,000 investment in assets. 1. Compute the Mustang Division's return...
Exercise 15-16 Return on investment and residual income LO 15-6, 15-7 Required Supply the missing information in the following table for Perez Company. (Do not round intermediate calculations. Round "ROI" answer to 2 decimal places. (i., .2345 should be entered as 23.45).) 365,400 Sales $ ROI Operating assets Operating income Turnover Residual income 2.1 13 % Operating profit margin Desired rate of return 18 %
ROI and Residual Income: Impact of a New Investment The Mustang Division of Detroit Motors had an operating income of $900,000 and net assets of $4,000,000. Detroit Motors has a target rate of return of 16 percent. (a) Compute the return on investment. (Round your answer to three decimal places.) 22.5 (b) Compute the residual income. $ 260,000 (c) The Mustang Division has an opportunity to increase operating income by $250,000 with an $750,000 investment in assets. 1. Compute the...
ROI and Residual Income: Impact of a New Investment The Mustang Division of Detroit Motors had an operating income of $900,000 and net assets of $5,000,000. Detroit Motors has a target rate of return of 16 percent. (a) Compute the return on investment. (Round your answer to three decimal places.) Answer (b) Compute the residual income. $Answer (c) The Mustang Division has an opportunity to increase operating income by $200,000 with an $850,000 investment in assets. 1. Compute the Mustang...
18 Solomon Corporation operates three Investment centers. The following financial statements apply to the investment center named Bowman Division BORCUN DIVISION Income Statement Tor the Year Ended December 31, 2018 Sales revenue $107,280 Cost of goods sold 58, 775 Gross margin 48,505 Operating expenses Selling expenses (2,780) Depreciation (4,135) expense Operating income 41,590 Nonoperating item Loss of sale of (4,000) Net Income $ 37.590 BOWMAN DIVISION Balance Sheet As of December 31, 2018 Assets Cash $ 12,582 Accounts receivable 40,...
Please show all work to get answers. ROI and Residual Income: Impact of a New Investment The Mustang Division of Detroit Motors had an operating income of $700,000 and net assets of $4,000,000. Detroit Motors has a target rate of return of 16 percent. (a) Compute the return on investment. (Round your answer to three decimal places.) (b) Compute the residual income. $ 60,000 (c) The Mustang Division has an opportunity to increase operating income by $200,000 with an $950,000...