1.ROI = (Sales – variable costs – Fixed costs)/Invested Capital
Current ROI = (4,280,000*30% - 1,091,000)/965,000
= 20%
If competitor is acquired = (193,000 + 72000)/1,445,000
= 18.34%
2.No, since it will reduce ROI
3-a Now = 72000/300,000 = 24%
After upgrade = 72000/480,000 = 15%
3-b. Yes, since ROI is higher than overall ROI
4.ROI = 265000/1,265,000
= 20.95%
5-a Current residual Income of Northeast division = Operating income – Invested capital*Required return
= 193,000 – 965000*10%
= $96,500
If Acquired = 96,500 + 24000
= $120,500
Yes, since it will increase Residual Income
Check my work Megatronics Corporation, a massive retailer of electronic products, is organized in four separate...
Megatronics Corporation, a massive retailer of electronic products, is organized in four separate divisions. The four divisional managers are evaluated at year-end, and bonuses are awarded based on ROI. Last year, the company as a whole produced a 14 percent return on its investment. During the past week, management of the company’s Northeast Division was approached about the possibility of buying a competitor that had decided to redirect its retail activities. (If the competitor is acquired, it will be acquired...
Megatronics Corporation, a massive retailer of electronic products, is organized in four separate divisions. The four divisional managers are evaluated at year-end, and bonuses are awarded based on ROI. Last year, the company as a whole produced a 14 percent return on its investment. During the past week, management of the company’s Northeast Division was approached about the possibility of buying a competitor that had decided to redirect its retail activities. (If the competitor is acquired, it will be acquired...
Megatronics Corporation, a massive retailer of electronic products, is organized in four separate divisions. The four divisional managers are evaluated at year-end, and bonuses are awarded based on ROI. Last year, the company as a whole produced a 13 percent return on its investment. During the past week, management of the company’s Northeast Division was approached about the possibility of buying a competitor that had decided to redirect its retail activities. (If the competitor is acquired, it will be acquired...
Megatronics Corporation, a massive retailer of electronic products, is organized in four separate divisions. The four divisional managers are evaluated at year-end, and bonuses are awarded based on ROI. Last year, the company as a whole produced a 15 percent return on its investment. During the past week, management of the company’s Northeast Division was approached about the possibility of buying a competitor that had decided to redirect its retail activities. (If the competitor is acquired, it will be acquired...
Could someone help me with the cells I got wrong and the
question 4?
Megatronics Corporation, a massive retailer of electronic products, is organized in four separate divisions. The four divisional managers are evaluated at year-end, and bonuses are awarded based on ROI. Last year, the company as a whole produced a 14 percent return on its investment. During the past week, management of the company's Northeast Division was approached about the possibility of buying a competitor that had decided...
The manager of Coleman Company's Outdoor Products Division has received word that the company's owners would like the Outdoor Products Division to add a new product line. He wants to look at the numbers and do some comparing before making a decision about adding a new line. As he sees it, his division has had the highest return on investment IRO) in the company for the past three years, and he doesn't want a new product line to change that...
Amsaca Products is a decentralized wholesaler with four autonomous divisions. The divisions are evaluated on the basis of ROI, with year-end bonuses given to divisional managers who have the highest ROI. Operating results for the company’s East Division for last year are given below: Last Year New Product Line Last Year + New Product Line Sales $21,000,000 $9,000,000 $30,000,000 Variable expenses $13,400,000 Contribution margin $ 7,600,000 Fixed expenses $ 5,920,000 Net operating income $ 1,680,000 Operating assets $ 5,250,000 The...
Residual Income and Investment Decisions Jarriot, Inc., presented two years of data for its Furniture Division and its Houseware Division. Furniture Division: Sales Year 1 $35,200,000 1,420,000 3,130,000 Year 2 $38,100,000 1,510,000 3,130,000 Operating income Average operating assets Houseware Division: Sales Operating income Average operating assets Year 1 $11,800,000 670,000 5,900,000 Year 2 $12,700,000 580,000 5,900,000 At the end of Year 2, the manager of the Houseware Division is concerned about the division's performance. As a result, he is considering...
Residual Income and Investment Decisions Jarriot, Inc., presented two years of data for its Furniture Division and its Houseware Division. Furniture Division: Year 1 Sales $35,500,000 $37,500,000 Operating income 1,440,000 1,520,000 Average operating assets 9,290,000 9,290,000 Houseware Division: $11,800,000 $12,900,000 Sales Operating income Average operating assets 640,000 5,550,000 500,000 5,550,000 At the end of Year 2, the manager of the Houseware Division is concerned about the division's performance. As a result, he is considering the opportunity to invest in two...
ROI and Investment Decisions Jarriot, Inc., presented two years of data for its Furniture Division and its Houseware Division. Furniture Division: Year 1 Year 2 Sales Operating income Average operating assets $35,000,000 $37,500,000 1,400,000 1,500,000 10,000,000 10,000,000 Houseware Division: Year 1 Year 2 Sales Operating income Average operating assets $12,000,000 $12,500,000 600,000 500,000 5,000,000 5,000,000 At the end of Year 2, the manager of the Houseware Division is concerned about the division's performance. As a result, he is considering the...