value: 5.00 points Coolbrook Company has the following information available for
ID: 2462304 • Letter: V
Question
value: 5.00 points Coolbrook Company has the following information available for the past year: River Division Stream Division Sales revenue $1,219,000 1,817,000 Cost of goods sold and operating expenses Net operating income Average invested asset 889,000 1,287,000 $ 330,000 $ 530,000 $1,000,000 $ 1,490,000 The company's hurdle rate is 7.51 percent. Required 1. Calculate return on investment (ROI) and residual income for each division for last year. (Do not round your intermediate calculations. Round "ROl" answers to 2 decimal places.) River Division Stream Division ROI Residual IncomeExplanation / Answer
Answer to 1 river division strean division sales 1219000 1817000 cost of goods sold and operating expenses 889000 1287000 net operating income 330000 530000 average invested assets 1000000 1490000 ROI net operating income/average invested assets 0.33 0.355704698 ROI percentage 33 35.5704698 Residual Income RI = Operating Income - (Operating Assets x Target Rate of Return) 254900 418101 answer no 2 Operating income increase by 9% river division strean division net operating income 330000 530000 New operating income with 9% increase 359700 577700 average invested assets 1000000 1490000 ROI net operating income/average invested assets 0.3597 0.387718121 ROI percentage 35.97 38.77181208 Residual Income RI = Operating Income - (Operating Assets x Target Rate of Return) 284600 465801 answer no 3 Operating income decrease by 12% river division strean division net operating income 330000 530000 New operating income with 12% decrease 290400 466400 average invested assets 1000000 1490000 ROI net operating income/average invested assets 0.2904 0.313020134 ROI percentage 29.04 31.30201342 Residual Income RI = Operating Income - (Operating Assets x Target Rate of Return) 215300 354501 answer no 4 if additional investment of 254000 is made and additional profit of 102000 is earned river division strean division net operating income 330000 530000 Additional income 102000 102000 new level of income 432000 632000 average invested assets 1000000 1490000 new investment in assets 254000 254000 new average invested assets 1254000 1744000 ROI net operating income/average invested assets 0.344498 0.362385321 ROI percentage 34.44976 36.23853211 Residual Income RI = Operating Income - (Operating Assets x Target Rate of Return) 399556.8 584536.8 changed hurdle rate to 5.51% Answer to 5 river division strean division sales 1219000 1817000 cost of goods sold and operating expenses 889000 1287000 net operating income 330000 530000 average invested assets 1000000 1490000 ROI net operating income/average invested assets 0.33 0.355704698 ROI percentage 33 35.5704698 Residual Income RI = Operating Income - (Operating Assets x Target Rate of Return) 274900 447901
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