Solution-Should required rate of return be the same for

Should required rate of return be the same for each division

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Question - Falling Inc. has a 15% required rate of return on investment (i.e., operating assets) in order for a division to be considered financially viable. Three of its divisions reported the following information for the past fiscal year:

	Portsmith	Horncastle	Kingswood
Operating assets	$14,000,000.00	$18,000,000.00	$10,000,000.00
Current liabilities	$600,000.00	$525,000.00	$680,000.00
Net operating income	$1,890,000.00	$3,132,000.00	$1,820,000.00

Required -

(A) Compute the ROI and indicate which division has the strongest financial performance.

(B) Based on your ROI calculations, is any division underperforming? Discuss.

(D) If different divisions within the company face differing business risks, should the required rate of return be the same for each division? Why or why not?

Reference no: EM133088375

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Should required rate of return be the same for each division

Reference no: EM133088375

Reference no: EM133088375

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