Ferris Ltd of Australia has two divisions one in Perth
Ferris Ltd. of Australia has two divisions, one in Perth and one in Darwin. Selected data on the two divisions follow:
Required:
1. Compute the ROI for each division.
2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 16%. Compute the residual income for each division.
3. Is the Darwin Division’s greater residual income an indication that it is better managed? Explain.
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