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ezto.mheducation.com/hm.tpx Frontier Mail Home MSN F Mail Welcome to Fro D Search Sign In Verizon MyVerizon 2 D Question 8 (of 9 value: 4.00 points Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Sales Average operating assets Net operating income Minimum required rate of return Division A Division B Division C $5,600,000 $9,600,000 $8,700,000 $1,120,000 $3,200,000 $1,740,000 $ 263,200 835,200 169,650 16 00% 26 10% 13 00% Required: 1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. (Round your answers to 2 decimal places.) Margin urnover ROI Division Division B Division C 2. Compute the residual income (loss) for each division. (Loss amounts should be indicated by a minus sign. Round your "Required rate of return to 2 decimal places.) Division A Division B Division C Average operating assets Required rate of return Required operating income Actual operating income Required operating income (above) Residual income (loss)Explanation / Answer
1 Return on investment = margin / Turnover Division A Division B Division C margin 263200 835200 169650 Turnover 1120000 3200000 1740000 Return on investment 23.50% 26.10% 9.75% Accept / reject Accept Accept Reject 2 Residual income = Operating income - ( Required rate * total assets) Division A Division B Division C Operating income 263200 835200 169650 Minimum rate 16% 26.10% 13% Average operating assets 1120000 3200000 1740000 Minimum rate *amount invested 179200 835200 226200 Residual income 84000 0 -56550 Accept / reject Accept Accept/reject Reject
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