Solution-Compute return on investment for each department

Compute return on investment for each department

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Reference no: EM131604669

Question - Megamart, a retailer of consumer goods, provides the following information on two of its departments (each considered an investment center).

Investment Center	Sales	Net Income	Average Invested Assets
Electronics	$9,800,000	$586,500	$3,450,000
Sporting goods	8,100,000	756,000	4,200,000

1-a Compute return on investment for each department.

1-b Using return on investment, which department is most efficient at using assets to generate returns for the company?

Electronics
Sporting goods

2-a Assume a target income level of 11.3% of average invested assets. Compute residual income for each department.

2-b Which department generated the most residual income for the company?

Electronics
Sporting goods

3. Assume the Electronics department is presented with a new investment opportunity that will yield a 14.2% return on investment. Should the new investment opportunity be accepted?

No, the new investment opportunity should not be accepted
Yes, the new investment opportunity should be accepted

Reference no: EM131604669

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Compute return on investment for each department

Reference no: EM131604669

Reference no: EM131604669

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