Homework Answers
Residual income = Operating income - ( Invested assets x Cost of capital)
10,000 = 40,000- ( 150,000 x Cost of capital)
-30,000 = -150,000 x cost of capital
cost of capital = 30,000/150,000
= 20%
Correct option is d.
Kindly comment if you need further assistance.
Thanks‼!
Add Answer to:
10. Division A, an investment center, has operating income = $40,000 for the prior period. The...
Return on investment The operating income and the amount of invested assets in each division of...
Return on investment The operating income and the amount of invested assets in each division of Conley Industries are as follows: Operating Income Invested Assets Retail Division Commercial Division Internet Division $9,600,000 12,100,000 $40,000,000 55,000,000 6,480,000 36,000,000 a. Compute the return on investment for each division Division Percent Retail Division Commercial Division Internet Division b. Which division is the most profitable per dollar invested? Residual Income The operating income and the amount of invested assets in each division of Conley...
The Labrador Falls Company has three divisions: A Division, B Division, and C Division. A B...
The Labrador Falls Company has three divisions: A Division, B Division, and C Division. A B C Sales $ 323,000 $ 543,000 ? Net operating income 61,500 ? $ 24,300 Residual income ? 37,500 14,700 Average Division Assets ? ? 81,500 Cost of Capital 12 % 10 % ? Profit Margin 20 % 4 % ? Asset Turnover ? 1 ? Return on investment 15 % ? ? What was A Division's residual income last year?
The South Korean Division has an operating income of $780,000 and assets of $3.9 million. The...
The South Korean Division has an operating income of $780,000 and assets of $3.9 million. The manager of the division is contemplating whether to acquire a new asset, which will cost $675,000 and will generate a contribution margin of $168,000 (before depreciation). The acquired asset will be depreciated based on the straight-line method over a useful life of six years and has no salvage value. The company's cost of capital is 15 percent. Ignore taxes. 13. (a) What is the...
The New Products Division of Testar Company, had operating income of $8,000,000 and operating assets of...
The New Products Division of Testar Company, had operating income of $8,000,000 and operating assets of $44,800,000 during the current year. The New Products Division has developed a potential new product that would require $8,500,000 in operating assets and would be expected to provide $1,400,000 in operating income each year. Testar has set a target return on investment (ROI) of 16% for each of its divisions. Assuming that the new product is put into production, calculate the residual income for...
QUESTION 12 Three measures of investment center performance are income from operations, rate of return on...
QUESTION 12 Three measures of investment center performance are income from operations, rate of return on investment, and residual income. True False QUESTION 13 If divisional income from operations is $100,000, invested assets are $850,000, and the minimum rate of return on invested assets is 8%, the residual income is $68,000. True False QUESTION 14 A decentralized business organization is one in which all major planning and operating decisions are made by top management True False QUESTION 15 Click Save...
Question 2 (1 point) If an investment center has generated a controllable margin of $150,000 and...
Question 2 (1 point) If an investment center has generated a controllable margin of $150,000 and sales of $600,000, what is the return on investment for the investment center if average operating assets were $1,000,000 during the period? a) 45% b) 15% Oc) 60% od) 25%
Question 1: Return on investment (ROI), residual income (RI) Generic Motors Corporation has two divisions. Division...
Question 1: Return on investment (ROI), residual income (RI) Generic Motors Corporation has two divisions. Division A Division B Investment (operating assets) | $400,000 $1,600,000 Profit $72,000 $224,000 The required rate of return (cost of capital) is 10% a year. a) Compute return on investment (ROI) for each division. ROI for A = % (if your answer is 9.5%, enter 9.5 without the percent sign) ROI for B = % b) Compute the residual income (RI) for each division. RI...
Return on investment and residual income Welch Insurance Company (WIC) earned operating income of $24,000,000 on...
Return on investment and residual income Welch Insurance Company (WIC) earned operating income of $24,000,000 on operating assets of $200,000,000 during 2018. The Automobile Insurance Division earned $4,770,000 on operating assets of $36,000,000. WIC has offered the Automobile Division $4,000,000 of additional operating assets. The manager of the Automobile Insurance Division believes she could use the additional assets to generate operating income amounting to $480,000. WIC has a desired return on investment (ROI) of 10 percent. Required a. Calculate the...
ROI and Residual Income: Impact of a New Investment The Mustang Division of Detroit Motors had an operating income of $7...
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...
Lambda Division had the following information: Asset base in Lambda Division $400,000 Net income in Lambda Division...
Lambda Division had the following information: Asset base in Lambda Division $400,000 Net income in Lambda Division $ 50,000 Weighted average cost of capital 12% Target ROI 15% Margin for Lambda Division 20% What is the residual income for Lambda Division? a.$7,500 b.$48,000 c.$60,000 d.$(10,000)
Return on investment The operating income and the amount of invested assets in each division of Conley Industries are as follows: Operating Income Invested Assets Retail Division Commercial Division Internet Division $9,600,000 12,100,000 $40,000,000 55,000,000 6,480,000 36,000,000 a. Compute the return on investment for each division Division Percent Retail Division Commercial Division Internet Division b. Which division is the most profitable per dollar invested? Residual Income The operating income and the amount of invested assets in each division of Conley...
The South Korean Division has an operating income of $780,000 and assets of $3.9 million. The manager of the division is contemplating whether to acquire a new asset, which will cost $675,000 and will generate a contribution margin of $168,000 (before depreciation). The acquired asset will be depreciated based on the straight-line method over a useful life of six years and has no salvage value. The company's cost of capital is 15 percent. Ignore taxes. 13. (a) What is the...
QUESTION 12 Three measures of investment center performance are income from operations, rate of return on investment, and residual income. True False QUESTION 13 If divisional income from operations is $100,000, invested assets are $850,000, and the minimum rate of return on invested assets is 8%, the residual income is $68,000. True False QUESTION 14 A decentralized business organization is one in which all major planning and operating decisions are made by top management True False QUESTION 15 Click Save...
Question 2 (1 point) If an investment center has generated a controllable margin of $150,000 and sales of $600,000, what is the return on investment for the investment center if average operating assets were $1,000,000 during the period? a) 45% b) 15% Oc) 60% od) 25%
Question 1: Return on investment (ROI), residual income (RI) Generic Motors Corporation has two divisions. Division A Division B Investment (operating assets) | $400,000 $1,600,000 Profit $72,000 $224,000 The required rate of return (cost of capital) is 10% a year. a) Compute return on investment (ROI) for each division. ROI for A = % (if your answer is 9.5%, enter 9.5 without the percent sign) ROI for B = % b) Compute the residual income (RI) for each division. RI...
Return on investment and residual income Welch Insurance Company (WIC) earned operating income of $24,000,000 on operating assets of $200,000,000 during 2018. The Automobile Insurance Division earned $4,770,000 on operating assets of $36,000,000. WIC has offered the Automobile Division $4,000,000 of additional operating assets. The manager of the Automobile Insurance Division believes she could use the additional assets to generate operating income amounting to $480,000. WIC has a desired return on investment (ROI) of 10 percent. Required a. Calculate the...
Most questions answered within 3 hours.
-
In Netherland Dwarf rabbits, dwarf size is determined by allele
N, and normal-size by allele n....
asked 7 seconds ago -
During Heaton Company’s first two years of operations, it
reported absorption costing net operating income as...
asked 14 minutes ago -
Consider testing the
hypotheses:
H0: p = 0.56
H1: p > 0.56
where p is
the...
asked 17 minutes ago -
In a two-factor analysis of variance a main effect is defined as
____.
a. the unique...
asked 25 minutes ago -
A bank's loan officer rates applicants for credit. The ratings
are normally distributed with a mean...
asked 25 minutes ago -
Fill in the following information for Adipic Acid: molecular
weight, g or ml, mole, melting point,...
asked 30 minutes ago -
how
to use a for loop to iterate over the string below and print each
character...
asked 32 minutes ago -
Please type answer, Thanks.
Respond to the following in a minimum of 175
words:
Research industry...
asked 32 minutes ago -
Assume that all interest rates in the economy increase from 9
percent to 10 percent. Which...
asked 42 minutes ago -
Describe the function of a Change Control Board.
When calculating Planned Value (PV), what is the...
asked 48 minutes ago -
The customer help center in your company receives calls from
customers who need help with some...
asked 59 minutes ago -
A manufacturer wished to compare the wearing qualities of two
different types of automobile tires, A...
asked 57 minutes ago