Solution-What will the divisional roi be for year

What will the divisional roi be for year

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Question - Harbor Division has total assets (net of accumulated depreciation) of $633,000 at the beginning of year 1. Harbor also leases a machine for $18,000 annually. Expected divisional income in year 1 is $81,000 including $5,300 in income generated by the leased machine (after the lease payment). Harbor's cost of capital is 9 percent. Harbor can cancel the lease on the machine without penalty at any time and is considering disposing of it today (the beginning of year 1).

Required -

a. Harbor computes ROI using beginning-of-the-year net assets. What will the divisional ROI be for year 1 assuming Harbor retains the leased machine?

b. What would divisional ROI be for year 1 assuming Harbor disposes of the leased machine?

c. Harbor computes residual income using beginning-of-the-year net assets. What will the divisional residual income be for year 1 assuming Harbor retains the leased machine?

d. What would divisional residual income be for year 1 assuming Harbor disposes of the leased machine?

Reference no: EM132796586

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What will the divisional roi be for year

Reference no: EM132796586

Reference no: EM132796586

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