ct Folder See Inside Connect newconnect mheducation.com/fow/connect html Help ne

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ct Folder See Inside Connect newconnect mheducation.com/fow/connect html Help nework Selected sales and operating data for three divisions of diferent structural engineering firms are given as follows: $15,9e0,e00 $28,728,099 $20,720,8ee 80,0ee 7,180,00 5,180,809 s 636,e99 43,800 $ 621,688 Sales Average operating assets Net operating income Minimun required rate of return 3,1 7.00% 7.56% 12.00% Required: 1. Compute the return on investment (RO) for each division using the formula stated in terms of margin and turnover 2 Compute the residual income (loss) for each division 3. Assume that each division is presented with an investment opportunity that would yield a 8% rate of return. a f performance is being measured by ROL which division or divisions will probably accept or reject the opportunity? Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req 3A Req 38 Compute the return on investment (RO1) for each division using the formula stated in terms of margin and turnover. (Do not ere to search

Explanation / Answer

Margin = net operating income/sales Turnover = sales/average operating assets ROI = margin * turnover 1) Div A Div B Div C Margin 4.00% 1.50% 3.00% Turnoverj 5 4.00 4.00 ROI 20.00% 6.00% 12.00% 2) Residual income = Net operating income -(average operating assets*min required return) Div A Div B Div C net operating income 636,000 430,800 621,600 min average return 222600 538500 621600 Residual income 413,400 -107,700 0 3A) DIV A Reject DIV B Accept DIV C Reject 3B) DIV A Accept DIV B Accept DIV C Reject

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