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

The company’s hurdle rate is 8 percent.

Required:

1. Calculate return on investment (ROI) and residual income for each division for last year.

2. Recalculate ROI and residual income for each division for each independent situation that follows:

a. Operating income increases by 10 percent.

b. Operating income decreases by 10 percent.

c. The company invests \($250,000\) in each division, an amount that generates \($100,000\) additional income per division.

d. Longview changes its hurdle rate to 6 percent.

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Sales Cost of goods sold and operating expenses Operating Income Average invested assets Northern Division $1,200,000 900,000 $ 300,000 $1,000,000 Southern Division $1,800,000 1,300,000 $ 500,000 $1,500,000