Only answer for part G please Altoona Technologies, Inc. (ATI) has three divisio

Question

Only answer for part G please

Altoona Technologies, Inc. (ATI) has three divisions. ATI has a desired rate of return of 12.5 percent. The operating assets and income for each division are as follows: Operating Income S 96,000 90,000 54,000 $240,000 Operating Divisions Printer Copier Assets S 540,000 810,000 360,000 $1,710,000 ?? Total ATI headquarters has $120,000 of additional cash to invest in one of its divisions. The division managers have identified investment opportunities that are expected to yield the following ROls Divisions Printer Copier Fax Expected ROIs for Additional Investments 14 . 0% 13.0% 12. 0% Required a-1. Calculate the ROI for each division. a-2. Which division manager is currently producing the highest ROl? b. Based on ROI, which division manager would be most eager to accept the $120,000 of investment funds? c. Based on ROI, which division manager would be least likely to accept the $120,000 of investment funds? d. Which division offers the best investment opportunity for ATI? g. Calculate the residual income: (1) At the corporate (headquarters) level before the additional investment. (2) At the division level before the additional investment. (3) At the investment level (4) At the division level after the additional investment.

Explanation / Answer

Ans a1 ROI of each division Operating Income/Operating Assets*100 rounded to two decimal rounded to one decimal Printer 96000/540000*100 17.78 17.8 Copier 90000/810000*100 11.11 11.1 Fax 54000/360000*100 15 15.0 ans a2 Printer Division is producing highest ROI ans b Copier would be most eager to accept as it has less ROI of 11.1% if it accepts its overall ROI will increase ans c Printer division manager would be least interest as already it has higher ROI than what the additional investment would give. ans d Printer division ans g Residual Income NOI-(Min Rate of retuen*Operating assets) g1 240000-(1710000*12.5%) $26,250 g2 Printer 96000-(540000*12.5%) $28,500 Copier 90000-(810000*12.5%) ($11,250) Fax 54000-(360000*12.5%) $9,000 g3 Printer (120000*14%)-(120000*12.5%) $1,800 Copier (120000*13%)-(120000*12.5%) $600 Fax (120000*12%)-(120000*12.5%) ($600) g4 Printer (96000+(120000*14%))-(660000*12.5%) $30,300 Copier (90000+(120000*13%))-(930000*12.5%) ($10,650) Fax (54000+(120000*12%))-(480000*12.5%) $8,400

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