Exercise 10-12 Evaluating New Investments Using Return on Investment (ROI) and Residual Income(LO10-1, LO10-2]Selected sales and operating data for three divisions of different structural engineering firms are given as follows:Division A$ 6,300,000$ 1,260,000340,200Division B$ 10,300,000$ 5,150,000968,20018.80%Division C$ 9,400,000$ 1,880,00024SalesAverage operating assetsNet operating incomeMinimum required rate of return2$249,10020.00%17.00%Required:1. Compute the return on investment (ROI) 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 20% rate of return.a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity?b. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity? a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity?b. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity?Complete this question by entering your answers in the tabs below.Req 1Req 2Req 3AReq 3BCompute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. (Do notround intermediate calculations. Round your answers to 2 decimal places.)MarginTurnoverROIDivision A%Division B%Division C%%< Req 1IReq 2 >

Exercise 10-12 Evaluating New Investments Using Return on Investment (ROI) and Residual Income (LO10-1, LO10-2] Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division A $ 6,300,000 $ 1,260,000 340,200 Division B $ 10,300,000 $ 5,150,000 %24 Division C $ 9,400,000 $ 1,880,000 249,100 17.00% Sales Average operating assets Net operating income Minimum required rate of return 968,200 18.80% 2$ 20.00%

Exercise 10-12 Evaluating New Investments Using Return on Investment (ROI) and Residual Income (LO10-1, LO10-2] Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division A $ 6,300,000 $ 1,260,000 340,200 Division B $ 10,300,000 $ 5,150,000 %24 Division C $ 9,400,000 $ 1,880,000 249,100 17.00% Sales Average operating assets Net operating income Minimum required rate of return 968,200 18.80% 2$ 20.00%

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter14: Decentralized Operations

Section: Chapter Questions

Problem 14.16E

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