Question

Norden Home Maintenance Company (NHMC) earned operating income of $4,800,000 on operating assets of $50,000,000 during 2014. The Tree Cutting Division earned $800,000 on operating assets of $8,000,000. NHMC has offered the Tree Cutting Division $1,000,000 of additional operating assets. The manager of the Tree Cutting Division believes he could use the additional assets to generate operating income amounting to $90,000. NHMC has a desired return on investment (ROI) of 8 percent.\

Required
a. Calculate the return on investment for NHMC, the Tree Cutting Division, and the additional investment opportunity.
b. Calculate the residual income for NHMC, the Tree Cutting Division, and the additional investment opportunity.



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  • CreatedFebruary 07, 2014
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