Solution-Recalculate ROI and residual income for the

Recalculate ROI and residual income for the division

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Reference no: EM132962518

Question - Coolbrook Company has the following information available for the past year:

	River Division	Stream Division
Sales revenue	$1,210,000	$1,803,000
Cost of goods sold and operating expenses	884,000	1,287,000
Net operating income	$326,000	$516,000
Average invested assets	$1,040,000	$1,490,000

The company's hurdle rate is 7.51 percent.

Required -

1. Calculate return on investment (ROI) and residual income for each division for last year.

2. Recalculate ROI and residual income for the division for each independent situation that follows:

a. Operating income increases by 8 percent.

b. Operating income decreases by 8 percent.

c. The company invests $246,000 in each division, an amount that generates $118,000 additional income per division.

d. Coolbrook changes its hurdle rate to 5.51 percent.

Reference no: EM132962518

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Recalculate ROI and residual income for the division

Reference no: EM132962518

Reference no: EM132962518

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