Homework Answers
1 - a.
ROI = Net Income/ Average invested assets.
SO,
| Numerator | / | Denominator | ROI | |
| Ie net income | ie avg assets | |||
| Electronics | 427,500 | / | 2,850,000 | 15.00% |
| Sporting Goods | 912,000 | / | 5,700,000 | 16.00% |
1 - b.
The department that has generated higher ROI has used its assets effeciently. Hence, Sporting Goods having higher ROI is efficient.
2 -a. Residual Income = Net Income - Target Income
Target Income = Average assets * Target %
| Electronics | Sporting goods | |||
| Net income (A) | Given | 427500 | Given | 912000 |
| Target Net Income (B) | 2850000*11.4% | 324900 | 5700000*11.4% | 649800 |
| Residual Income (A - B) | 102600 | 262200 | ||
2 - b. Looking at the 2 - a, its obvious that Sporting Goods have generated Higher Residual Income.
2 - c. The present ROI of electronics division is 15%. The proposed opportunity generates 14.8% of ROI which is less than 15%. Hence the new investment opportunity should not be accepted.
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Megamart, a retailer of consumer goods, provides the following information on two of its departments (each...
Megamart, a retailer of consumer goods, provides the following information on two of its departments (each...
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 Income $40,500,000 $2,916,000 20,740,000 2,074,000 Average Invested Assets $16,200,000 12,200,000 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 11% of average invested assets. Compute residual income for each department....
Megamart, a retailer of consumer goods, provides the following information on two of its departments (each...
Megamart, a retailer of consumer goods, provides the following information on two of its departments (each considered an investment center). Average Invested Assets $16,900,000 12,900,000 Investment Center Sales Income $42,250,000 $3,211,000 2,322,000 Electronics Sporting goods 19,350,000 Exercise 9-10 Computing return on investment and residual income; investing decision LO A1 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...
The following information applies to the questions displayed below. Megamart, a retailer of consumer goods, provides...
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 Income $42,240,000 $3,168,000 23, 120,000 2,312.000 Average Invested Assets $17,600,000 13.600.000 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 11%...
The following information applies to the questions displayed below] Megamart, a retailer of consumer goods, provides...
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) Average Invested Assets Investment Center Sales Income Electranics $42960,000 $3222000 18,904,000 2.363,000 s 17900,000 Sparting goods 13.900,000 Award: 3.00 points 1. Compute return on investtment for each department Using return on investment, which department is most efficlent at using assets to generate returns for the company? 2. Assume a target income...
Required information (The following information applies to the questions displayed below.] Megamart, a retailer of consumer...
Required information (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 Income $42,250,000 $3,211,000 19,350,000 2,322,000 Average Invested Assets $16,900,000 12,900,000 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...
Required information (The following information applies to the questions displayed below.) Megamart, a retailer of consumer...
Required information (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 Income $ 42,960,000 $3,222,000 18,904,000 2,363,000 Average Invested Assets $17,900,000 13,900,000 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...
Required information [The following information applies to the questions displayed below.] Megamart, a retailer of consumer...
Required information [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 Income $63,460,000 $3,173,000 19,650,000 2,286,000 Average Invested Assets $16,700,000 12,700,000 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...
Required information [The following information applies to the questions displayed below.) Megamart, a retailer of consumer...
Required information [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 Income $ 40, 800,000 $3,060,000 17,680,000 2,210,000 Average Invested Assets $17,000,000 13,000,000 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...
Required information [The following information applies to the questions displayed below.] Megamart, a retailer of consumer...
Required information [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 Sales Income Average Invested Assets Electronics $ 42,250,000 $ 3,211,000 $ 16,900,000 Sporting goods 19,350,000 2,322,000 12,900,000 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...
Required information The following information applies to the questions displayed below. Megamart, a retailer of consumer...
Required information 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 $34,800,000 20,100,000 Income $3,306, 10 2,412,000 Average Invested Assets $17, 400, BGD 13,400,000 1. Compute return on investment for each department. Using retum on investment, which department is most efficient at using assets to generate returns for the company 2. Assume a target...
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 Income $40,500,000 $2,916,000 20,740,000 2,074,000 Average Invested Assets $16,200,000 12,200,000 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 11% of average invested assets. Compute residual income for each department....
Megamart, a retailer of consumer goods, provides the following information on two of its departments (each considered an investment center). Average Invested Assets $16,900,000 12,900,000 Investment Center Sales Income $42,250,000 $3,211,000 2,322,000 Electronics Sporting goods 19,350,000 Exercise 9-10 Computing return on investment and residual income; investing decision LO A1 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...
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 Income $42,240,000 $3,168,000 23, 120,000 2,312.000 Average Invested Assets $17,600,000 13.600.000 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 11%...
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) Average Invested Assets Investment Center Sales Income Electranics $42960,000 $3222000 18,904,000 2.363,000 s 17900,000 Sparting goods 13.900,000 Award: 3.00 points 1. Compute return on investtment for each department Using return on investment, which department is most efficlent at using assets to generate returns for the company? 2. Assume a target income...
Required information (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 Income $42,250,000 $3,211,000 19,350,000 2,322,000 Average Invested Assets $16,900,000 12,900,000 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...
Required information (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 Income $ 42,960,000 $3,222,000 18,904,000 2,363,000 Average Invested Assets $17,900,000 13,900,000 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...
Required information [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 Income $63,460,000 $3,173,000 19,650,000 2,286,000 Average Invested Assets $16,700,000 12,700,000 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...
Required information [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 Income $ 40, 800,000 $3,060,000 17,680,000 2,210,000 Average Invested Assets $17,000,000 13,000,000 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...
Required information 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 $34,800,000 20,100,000 Income $3,306, 10 2,412,000 Average Invested Assets $17, 400, BGD 13,400,000 1. Compute return on investment for each department. Using retum on investment, which department is most efficient at using assets to generate returns for the company 2. Assume a target...
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