ces Wescott Company has three divisions: A, B, and C. The company has a hurdle rate...
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ces Wescott Company has three divisions: A, B, and C. The company has a hurdle rate of 8 percent. Selected operating data for the three divisions are as follows: Sales revenue Cost of goods sold Miscellaneous operating expenses Interest and taxes Average invented assets Division A $ 1,245,000 769,000 76,000 60,000 10,376,000 Division B $ 1,148,000 843,000 64,000 53,000 2,494,000 Required: 1. Compute the ROI for each division. 2. Compute the residual income for each division. 3. Rank the divisions according to the ROI and residual income of each. Division C $ 1,162,000 844,000 65,000 53,000 4,101,000 Wescott is considering an expansion project in the upcoming year that will cost $6.9 million and return $576,000 per year. The project would be implemented by only one of the three divisions. 4-a. Compute the return on investment on the proposed expansion project. 4-b. Is this an acceptable project? 5. Without any additional calculations, state whether the proposed project would increase or decrease each division's ROI. 6. Compute the new ROI and residual income for each division if the project was implemented within that division. ces Wescott Company has three divisions: A, B, and C. The company has a hurdle rate of 8 percent. Selected operating data for the three divisions are as follows: Sales revenue Cost of goods sold Miscellaneous operating expenses Interest and taxes Average invented assets Division A $ 1,245,000 769,000 76,000 60,000 10,376,000 Division B $ 1,148,000 843,000 64,000 53,000 2,494,000 Required: 1. Compute the ROI for each division. 2. Compute the residual income for each division. 3. Rank the divisions according to the ROI and residual income of each. Division C $ 1,162,000 844,000 65,000 53,000 4,101,000 Wescott is considering an expansion project in the upcoming year that will cost $6.9 million and return $576,000 per year. The project would be implemented by only one of the three divisions. 4-a. Compute the return on investment on the proposed expansion project. 4-b. Is this an acceptable project? 5. Without any additional calculations, state whether the proposed project would increase or decrease each division's ROI. 6. Compute the new ROI and residual income for each division if the project was implemented within that division.
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Lets go through each of the required calculations and questions step by step 1 Compute ROI for each division ROI fractextOperating IncometextAverage I... View the full answer
Related Book For
Managerial Accounting
ISBN: 978-0078025518
2nd edition
Authors: Stacey Whitecotton, Robert Libby, Fred Phillips
Posted Date:
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