Business, 30.05.2021 06:30, weridness80

Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division A Division B Division C Sales $ 12,000,000 $ 14,000,000 $ 25,000,000 Average operating assets $ 3,000,000 $ 7,000,000 $ 5,000,000 Net operating income $ 600,000 $ 560,000 $ 800,000 Minimum required rate of return 14 % 10 % 16 % Required: 2. Compute the residual income for each divisions.
3. Assume that each division is presented with an investment opportunity that would yield a 15% rate of return.

If performance is being measured by ROI, which division or divisions will probably accept the opportunity? Reject? Why?

If performance is being measured by residual income, which division or divisions will probably accept the opportunity? Reject? Why?

Answers: 1

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Selected sales and operating data for three divisions of different structural engineering firms are...