Answer
Current Investment |
$7,500,000 |
Net Operating income at 11% |
$825,000 |
Current required ROI at 7% |
$525,000 |
Current Residual Income |
$300,000 |
New residual Income
Current |
Additional |
TOTAL NEW |
|
Current Investment |
$7,500,000 |
$4,500,000 |
$12,000,000 |
Net Operating income at 11% |
$825,000 |
$405,000 |
$1,230,000 |
Current required ROI at 7% |
$525,000 |
$315,000 |
$840,000 |
Current Residual Income |
$300,000 |
$90,000 |
$390,000 ANSWER |
Exercise 9-12A Comparing return on investment with residual income LO 9-2, 9-3 The Monarch Division of...
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...
the monarch division 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 13 percent. The company target ROI is 9 percent. The Monarch Division has an opportunity to invest $5,600,000 at 11 percent but is reluctant to do so because its ROI will fall to 12 20 percent. The present investment base for the division is $8.400,000. Required a. Calculate the current residual income and 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...
Exercise 9-12 Evaluating New Investments Using Return on Investment (ROI) and Residual Income [LO9-1, LO9-2] Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division A Division B Division C Sales $ 5,700,000 $ 9,700,000 $ 8,800,000 Average operating assets $ 1,140,000 $ 4,850,000 $ 1,760,000 Net operating income $ 273,600 $ 853,600 $ 180,400 Minimum required rate of return 17.00 % 17.60 % 14.00 % Required: 1. Compute the return on...
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...
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...
Evaluating New Investments Using Return on Investment (ROI) and Residual Income Three divisions of Watcore Inc. report the following sales and operating data: Division A Division B Division C Sales . . .... . . . . . .. . .. .. $6,000,000 $10,000,000 $8,000,000 Average operating assets . . . $1,500,000 $5,000,000 $2,000,000 Operating income ... .... . . $300,000 $900,000 $180,000 Minimum required rate of return. 15% 18% 12% Required: 1. Compute the return...
Return on Investment for Multiple Investments, Residual Income The manager of a division that produces add-on products for the automobile industry has just been presented the opportunity to invest in two independent projects. The first is an air conditioner for the back seats of vans and minivans. The second is a turbocharger. Without the investments, the division will have average assets for the coming year of $29.4 million and expected operating income of $4.335 million. The outlay required for each...