Reference no: EM131600255
Problem - You have the following information about a company's A and B divisions:
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A
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B
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Sales
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$720,000
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d
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Operating income
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$54,000
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e
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Average Operating assets
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a
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$120,000
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Margin
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b
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4%
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Turnover
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c
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5
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Return on investment (ROI)
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15%
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f
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Question:
1. Complete missing information
a. $ ______ Average Operating assets for A Division
b. ______ % Margin for A Division
c. Turnover for A Division is ______ times.
d. $ ______ Sales for B Division
e. $ ______ Operating income for B Division
f. ______ % Return on investment for B division
2. Assume A Division has a minimum required rate of return of 12%. Based on this information and your calculation s above, determine A Division's residual income.
3. Assume that A Division has an investment opportunity that would yield a rate at return of 13%. If the division manager's performance is being measured by ROI, is she likely to accept the opportunity? Why or Why not?