Benson Home Maintenance Company earned operating income of $6,604,500 on operati

Question

Benson Home Maintenance Company earned operating income of $6,604,500 on operating assets of $59,500,000 during 2018. The Tree Cutting Division earned $1,202,340 on operating assets of $6,910,000. Benson has offered the Tree Cutting Division $2,200,000 of additional operating assets. The manager of the Tree Cutting Division believes he could use the additional assets to generate operating income amounting to $459,800. Benson has a desired return on investment (ROI) of 9.10 percent Required a. Calculate the return on investment for Benson, the Tree Cutting Division, and the additional investment opportunity. b. Calculate the residual income for Benson, the Tree Cutting Division, and the additional investment opportunity. Complete this question by entering your answers in the tabs below. RequiredARequired B Calculate the return on investment for Benson, the Tree Cutting Division, and the additional investment opportunity. (Round your answers to 2 decimal places.(i.e.,.2345 should be entered as 23.45).) Return on Investment Benson Home Maintenance Company Tree Cutting Division Additional investment opportunity

Explanation / Answer

Return on investment Benson home maintenance company 11.10% =6604500/59500000 Tree cutting division 17.40% =1202340/6910000 Additional investment opportunity 20.90% =459800/2200000 Residual income Benson home maintenance company 1190000 =6604500-(59500000*9.1%) Tree cutting division 573530 =1202340-(6910000*9.1%) Additional investment opportunity 259600 =459800-(2200000*9.1%)

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