Benchmark Home Hardware s manufacturing division of lawn mowing and snow blowing
Benchmark, Home Hardware’s manufacturing division of lawn-mowing and snow blowing equipment, segments its business according to customer type: Professional and Residential. The following divisional information was available for the past year:
Assume that management has a 25% target rate of return for each division. Also, assume that Benchmark’s weighted average cost of capital is 15% and its effective tax rate is 30%.
Requirements
Round all of your answers to four decimal places.
1. Calculate each division’s ROI.
2. Calculate each division’s profit margin. Interpret your results.
3. Calculate each division’s asset turnover. Interpret your results.
4. Use the expanded ROI formula to confirm your results from Requirement 1. What can you conclude?
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