Question

Campbell Corporation operates three investment centers. The following financial statements apply to the investment center named Bowman Division: BONMAN DIVISION Income Statement For the Year Ended December 31, 2018 Sales revenue $106,280 58,875 47,405 Cost of goods sold Gross margin Operating expenses Selling expenses Depreciation expense (2,750) (4,195) 40,460 Operating income Nonoperating iten Loss of sale of land (3,700) Net income $ 36,760 BONMAN DIVISION Balance Sheet As of December 31, 2018 Assets Cash Accounts receivable Merchandise inventory Equipment less accumulated depreciation Nonoperating assets 12,532 40,286 37,300 90,328 9,800 $190,246 Total assets Liabilities Accounts payable Notes payable $ 9,447 63,000 Stockholders' equity 80,000 37,799 $190,246 Common stock Retained earnings Total liabilities and stockholder's equity Required c. Calculate the ROl for Bowman. d. Campbell has a desired ROI of 14 percent. Headquarters has $95,000 of funds to assign to its investment centers. The manager of the Bowman Division has an opportunity to invest the funds at an ROI of 16 percent. The other two divisions have investment opportunities that yield only 15 percent. Calculate the new ROl for Bowman division, if the investment opportunity is adopted by Bowman. e. Based on the original data, calculate the original residual income. Also, calculate the new residual income based on information provided in Requirement d Complete this question by entering your answers in the tabs below Required Required DRequired E Calculate the ROI for Bowman. (Round your answer to 2 decimal places. (i.e., .2345 should be entered as 23.45).) Required C Required D > Complete this question by entering your answers in the tabs below Required C Required DRequired E Campbell has a desired ROI of 14 percent. Headquarters has $95,000 of funds to assign to its investment centers. The manager of the Bowman Division has an opportunity to invest the funds at an ROI of 16 percent. The other two divisions have investment opportunities that yield only 15 percent. Calculatethe new ROI for Bowman division, if the investment opportunity is adopted by Bowman. (Round your answer to 2 decimal places. (i.e., .2345 should be entered as 23.45).) Show lessA New RO Required C Required E> Complete this question by entering your answers in the tabs below Required C Required D RequiredE Based on the original data, calculate the original residual income. Also, calculate the new residual income based on information provided in Requirement d. (Round your final answer to nearest whole dollar.) Original residual income New residual income

Answer 1

	BOWMAN DIVISION
	Return on Investment=Net Operating Income/Net operating Investment
	Net Operating Investment=(Total Assets-Non operating assets)
	Net operating Income=	$        40,460.00
	Net Operating Investment=($190246-$9800)	$    1,80,446.00
c )	Return on Investment=($40460/$180446)	22.42%
	Headquarters assigns funds to its investment	$        95,000.00
	Bowman has an opportunity to invest funds at an ROI	16%
	Opportunity cost of investment=($95000*16%)	$        15,200.00
	ROI=($40460+$15200)/($180446+$15200)
d)	ROI=	20.21%
e)	Residual Income=(Net operating Income-(Operating assets*ROI)
	Residual Income=(40460-(180446*14%))	$        15,197.56
	New Residual Income=(($40460+$15200)-($180446+$95000)*14%)	$        17,097.56