Luke Company has three divisions: Peak, View, and Grand. The company has a hurdl

Question

Luke Company has three divisions: Peak, View, and Grand. The company has a hurdle rate of 5.51 percent. Selected operating data for the three divisions follow: View S 337,000 $ 232,000 310,000 121,000 Peak Grand Sales revenue Cost of goods sold Miscellaneous operating expenses Average invested assets 199,000 41,000 184,000 38,000 950,000 119 38,000 1,320,000 1,195,000 Required 1. Compute the return on investment for each division. Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%) Peak View Grand Return on Investment 2. Compute the residual income for each division. (Loss amounts should be indicated by a minus sign. Round your answers to nearest whole dollar.) Peak View Grand Residual Income (Loss)

Explanation / Answer

1) Calculate return on investment :

2) Calculate residual income :

Peak View Grand Sales 337000 232000 310000 Cost of goods sold 199000 121000 184000 Operating expense 41000 38000 38000 Net operating income 97000 73000 88000 Average operating assets 1320000 950000 1195000 ROI 7.35% 7.68% 7.36%

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