Selected sales and operating data for three divisions of a multinational structu

Question

Selected sales and operating data for three divisions of a multinational structural engineering firm are provided below: Division Asia Europe North America Sales Average operating assets Net operating income $14,000,000 $16,000,000 $27,000,000 5,720,000 0,800,000 972,000 3,500,000 525,000 460,000 inimum required rate of return 15% 11% 17% Required 1. Compute the ROl for each division using the formula stated in terms of margin and turnover. (Do not round intermediate calculations and round your final answers to the nearest whole percent.) ROI Asia division Europe division North America division 151% 81% 91% 2. Compute the RI for each division RI Asia division Europe division North America division

Explanation / Answer

2. Residual Income ( RI) = Net Operating Income - ( Average Operating Assets x Minimum Required Rate of Return )

3. a.

3. b.

RI Asia Division $ 0 Europe Division $ 169,200 North America Division $ 864,000

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