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Compute the residual income for each division

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Reference no: EM133161062

Question - ROI and Residual Income: Basic Computations - Watkins Associated Industries is a privately held conglomerate. Assume that the company uses return on investment and residual income as two of the evaluation tools for division managers. The company has a minimum desired rate of return on investment of 15%. Selected operating data for three of the divisions of the company follow.

 

Trucking Division

Seafood Division

Construction Division

Sales

$6,450,000

$1,845,000

$5,200,000

Operating assets

3,750,000

580,000

1,750,000

Net operating income

525,000

116,000

385,000

Required -

(a) Compute the return on investment for each division. (Round answers to three decimal places.)

(b) Compute the residual income for each division. Note: Use a negative sign if residual income is a loss.

Reference no: EM133161062

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