Question

PROBLEM 2: Evaluation of investment centers-40 Points Eagle Mart has two locations: Statesboro and Savannah. Selected sales and operating data for the two locations are provided below: Minimum Required Rate of Return Average Operating Assets Sales Net Operating Income Statesboro Location 15% $1,525,000 $6,100,000 $317,200 Savannah Location 12% $2,300,000 $9,200,000 $225,400 Requirement 1: Compute return on investment for each location. You MUST show your work for possible credit. Round percentages to the nearest 1 decimal place (i.e..6666 = 66.7%). Statesboro Location ROI = 0 312,200 Savannah Location ROJ 12 12:24 Requirement 2: Compute residual income for each location. You MUST show your work for possible credit. Statesboro Location Residual income on your work torpa Savannah Location Residual mome

Answer 1

Requirement 1 Statesboro Location Return on Investment Net Operating income / Average Operating Assets $317,200/$15.25.000 Savannah Location Return on Investment Net Operating income / Average Operating Assets $225,400/$23,00,000 20.8% 9.8% Requirement 2 Statesboro Location Requirement 2 Savannah Location Residual Income = Net Operating Income - (Minimum Required rate of return* Average Operating Assets) $317,200- (15%*$15,25,000) Residual Income = Net Operating Income (Minimum Required rate of return* Average Operating Assets) $225,400- (12%* $23,00,000) (50,600.00) 88,450.00