Adams Corporation evaluates divisional managers based on Return on Investment (R

Question

Adams Corporation evaluates divisional managers based on Return on Investment (ROI) and has provided the operating results of the Northern Division from last year. The Controller has asked you to compute the ROI and Residual Income based on data from last year and if the division adds a new product line. Use the information included in the Excel Simulation and the Excel functions described below to complete the task. • Cell Reference: Allows you to refer to data from another cell in the worksheet. From the Excel Simulation below, if in a blank cell, "=G5" was entered, the formula would output the result from cell G5, or 4.00 in this example. • Basic Math functions: Allows you to use the basic math symbols to perform mathematical functions. You can use the following keys: + (plus sign to add), - (minus sign to subtract), * (asterisk sign to multiply), and/ (forward slash to divide). From the Excel Simulation below, if in a blank cell *=G5+G6" was entered, the formula would add the values from those cells and output the result, or 10.00 in this example. If using the other math symbols the result would output an appropriate answer for its function. · SUM function: Allows you to refer to multiple cells and adds all the values. You can add individual cell references or ranges to utilize this function. From the Excel Simulation below, if in a blank cell "=SUM(G5, G6,37) was entered, the formula would output the result of adding those three separate cells, or 12.00 in this example. Similarly, if in a blank cell *=SUM(G5:G7)" was entered, the formula would output the same result of adding those cells, except they are expressed as a range in the formula, and the result would be 12.00 in this example. IF function: Allows you to test a condition and return a specific value is the result is true and different value if the result is false. The syntax of the IF function is "=IF(test_condition,value_if true, value_if_false)" and specific considerations need to be made when using this function. The test condition argument is an evaluation of the status of a cell, such as if the value of a cell is greater than, less than or equal to another number or cell. The value if true and value_il_false arguments will return any specific result for each option, such as another cell reference, a value, or text. Throughout the entire equation, if text is being used in the test condition, value_if_true, or value_if_false arguments then the text itself should be entered in quotations so that Excel will recognize the text as a "string of text" instead of another function. From the Excel Simulation below, if in a blank cell "=IF(G10>20,"Total cost is High", Total cost is low") was entered, the formula would output the result of the value if true since the test_condition would be result as true, or in this case the text Total cost is high". Excel processes the IF function by separating it out into separate parts. First the test condition - Excel thinks, find cell G10 and determine if the value is greater than 20. Once Excel determines if the result of that test condition is TRUE or FALSE, it will return the value_if_true or value_if_false.

Explanation / Answer

IF ROI is more Than Cost of Capital ,The Manager Can Accept the New Product Line

Particulars Operating Income(1) Operating Assets(2) Cost of Capital%(3) (2x3) Residual Income 1-(2*3) 4 Last Year 1995000 9500000 15 1425000 570000 5 Considering Newline 2395000 12000000 15 1800000 595000 Only New line 400000 2500000 15 375000 25000 6 The Northern Divison Manager will Accept New Line If ,Residual Income is Positive Since the Residual income is Positive ,Mnager can accept the new Product line

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