Calculation of normal expected rate of returnthe gean

Assignment Help Financial Accounting

Reference no: EM13355739

Calculation of Normal Expected Rate of Return.

The Gean Corporation had net operating income of $380,000 and average operating assets of $2,000,000. The corporation requires a return on investment of 18%.

Required:

a) Calculate the company's return on investment (ROI) and residual income (RI).

b)Gean Corporation is considering an investment of $70,000 in a project that will generate annual net operating income of $12,950. Would it be in the best interests of the company to make this investment?

c) Gean Corporation is considering an investment of $70,000 in a project that will generate annual net operating income of $12,950. If the division planning to make the investment currently has a return on investment of 20% and its manager is evaluated based on the division's ROI, will the division manager be inclined to request funds to make this investment?

d)Gean Corporation is considering an investment of $70,000 in a project that will generate annual net operating income of $12,950. If the division planning to make the investment currently has a residual income of $50,000 and its manager is evaluated based on the division's residual income, will the division manager be inclined to request funds to make this investment?

Reference no: EM13355739

Questions Cloud

Depreciation calculation methodsfreedom co purchased a new : depreciation calculation methods.freedom co. purchased a new machine on july 2 2008 at a total installed cost of 44000.

Estimated irr of the projectthe campbell golf company is : estimated irr of the project.the campbell golf company is considering the addition of a computerized robot to its

Five traditional financial indicatorsthere are five : five traditional financial indicators.there are five traditional financial indicators identified below for lipscomb

Calculation of free cash flow for cadecade corporations : calculation of free cash flow for cade.cade corporations balance sheet and income statement appear belowcomparative

Calculation of normal expected rate of returnthe gean : calculation of normal expected rate of return.the gean corporation had net operating income of 380000 and average

Lease renting or purchase of machine decision making based : lease renting or purchase of machine decision making based on present value at a given discount rate of maintenance

Components of or items in bank reconciliation with example : components of or items in bank reconciliation with example and operation to be done to complete reconciliation.in

Preparation of bank reconciliation statement given the : preparation of bank reconciliation statement given the itemsentries affecting the respective balances.using the

Types of funds and taxes in government accounting and : types of funds and taxes in government accounting and operations.assume that the city of ft. smith maintains its books

User Account

All Pages