Escuda Company has the following information available for the past year:

The company’s hurdle rate is 12 percent.
1. Determine Escuda’s return on investment (ROI) and residual income for each division for last year.
2. Recalculate Escuda’s ROI and residual income for both divisions for each independent situation that follows:
a. Net operating income increases by 10 percent.
b. Net operating income decreases by 10 percent.
c. The company invests $400,000 in each division, an amount that generates $80,000 additional income per division.
d. Escuda changes its hurdle rate to 9percent.

  • CreatedFebruary 27, 2015
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