Required information The following information applies to the questions displaye

Question

Required information The following information applies to the questions displayed below Megamart, a retailer of consumer goods, provides the following information on two of its departments (each considered an investment center). Average Invested Assets sales Income Investment Center Electronics Sporting goods $42,960,000 $3,222,000 $17,900,000 18,904,000 2,363,00013,900,000 1. Compute return on investment for each department. Using return on investment, which department is most efficient at using assets to generate returns for the company? 2 Assume a target income level of 12% of average invested assets Compute residual income for each department which department generated the most residual income for the company? 3. Assume the Electronics department is presented with a new, investment opportunity that will yield a 14% return on investment. Should the new investment opportunity be accepted? Complete this question by entering your answers in the tabs below. Required 1Required 2 Required 3 t. Using return on investment, which department is most efficient at using Compute return on investment for each departmen assets to generate returns for the company? Return on Investment Return on Investment Return on Investment Choose Numerator l Choose Denominator Electronics Sporting Goods Which department is most efficient at using assets to generate returns

Explanation / Answer

Answer

Choose Numerator

Choose Denominator

Return on Investment

Income

Average Invested Assets

Return on Investment

Electronics

$3222000

$17900000

18%

Sporting Goods

$2363000

$13900000

17%

Which department is most efficient…..?

Electronics Division as its ROI is greater

Electronics

Sporting Goods

Net Income

$3222000

$2363000

Target Income

$2148000

$1668000

Residual Income

$1074000

$695000

Which department is most……..?

Electronics Division, it has greater Residual income left

NO, it should not be accepted as Electronics devision is earning a return of 18%, greater than 14%

Choose Numerator

Choose Denominator

Return on Investment

Income

Average Invested Assets

Return on Investment

Electronics

$3222000

$17900000

18%

Sporting Goods

$2363000

$13900000

17%

Which department is most efficient…..?

Electronics Division as its ROI is greater

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