Determine the company''s return on investment

Assignment Help Financial Accounting

Reference no: EM1310755

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: EM1310755

Questions Cloud

Calculation of free cash flow for cade : Calculation of free cash flow for Cade. and How much cash did Cade pay to vendors for inventory during the period and How much cash did Cade pay in income taxes?

Sectors on the physical device : For any volume(s) situated on the EnCE Hard Drive, answer the following questions by writing question number and answer within a Notes Bookmark. Keep the Notes Bookmark within the bookmark folder created for that volume. Specify how many sectors a..

Childrens understanding of implication : Her children’s understanding of her implication demonstrates that they have some understanding of _______.

Ccomputation of annual interest charges for a given degree : Computation of Annual interest charges for a given degree of combined leverage and a lowered degree of combined leverage.

Determine the company''s return on investment : Determine the company's return on investment (ROI) and residual income (RI).

Financial costs of chronic illness : You will locate a credible website, preferably a government website that chronicles the financial costs of the chronic condition you have been focusing on this term.

Computation of degree of combined leverage : Computation of Degree of operating leverage and financial leverage & combined leverage and EPS if sales level declined.

Should beryl''s iced tea continue to rent : Purchase a new, more advanced machine for $250,000. This machine will require $15,000 per year in ongoing maintenance expenses and will lower bottling costs by $10,000 per year. Should Beryl's Iced Tea continue to rent, purchase its current machine..

Non-provisional and provisional patent : Explain the difference between the non-provisional and the provisional patent.

User Account

All Pages