Question

Check my work Universal Electronics, Inc. (UEI), which started operations one year ago, has two divisions: Consumer and Commercial. Both divisions invest heavily in R&D, which is assumed to benefit five years. R&D spending is made uniformly throughout the year. UEI has a cost of capital of 11 percent. Selected financial information for the two divisions (in thousands of dollars) for the year just completed follows. points Skipped Sales revenue Divisional income Divisional investment Current liabilities R&D Consumer $34,000 6,100 30,500 2,200 2,200 Commercial $55,000 6,450 32,250 2,000 2,200 eBook Print Required: Evaluate the performance of the two divisions assuming UEl uses return on investment (ROI). References ROI of Consumer division ROI of Commercial division Which division performed better?

Answer 1

ROI Defined

Return on investment (ROI) is the ratio of a profit or loss made in a fiscal year expressed in terms of an investment. It is expressed in terms of a percentage of increase or decrease in the value of the investment during the year in question. For example, if you invested $100 in a share of stock and its value rises to $110 by the end of the fiscal year, the return on the investment is a healthy 10%, assuming no dividends were paid.

In the give problem

A.consumer division

Division income =$6100

Division investment = $ 30500

ROI = 6100/30500*100= 20%

B. Commercial

Division income = $ 6450

Division investment=$32250

ROI = 6450/32250*100 = 20%