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Calculate residual income for each profit center

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Reference no: EM133061035

Question - Johnson Company has two sources of funds: long-term debt and equity capital. Johnson Company has profit centers in the following locations with the following net incomes and total assets:

 

Net Income

Assets

Las Vegas

$710,000

$4,000,000

Dallas

950,000

8,000,000

Tampa

1,790,000

12,000,000

Required -

a. Calculate ROI for each profit center and rank them from highest to lowest based on ROI.

b. Calculate residual income for each profit center based on a desired ROI of 5% and rank them from highest to lowest based on residual income.

Reference no: EM133061035

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