What is the residual income for the oyster

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Question - X is a family company that owns two hotels in NY: The Cod and The Oyster. X treats each of the hotels as a separate operating division. The two properties presented the following measures for the current year:

 

Total Asset

Current Liabilities

Operating Income

The Cod

42500000

8400000

4165000

The Oyster

48000000

6600000

4380000

X's required rate of return is 9 percent

What is the ROI for The Cod?

What is the Residual Income for The Oyster?

The Oyster has the opportunity to invest in a pilates equipment set that costs 1900000 and produces a marginal increase in operating income of 150000. Should they invest in it? and explain why?

Reference no: EM133090180

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