Question: Alternative problem E Goodwin Company has three segments: 1, 2, and 3. Data regarding these segments follow: Segment 1 Segment 2 Segment 3 Contribution to

Alternative problem E Goodwin Company has three segments: 1, 2, and 3. Data regarding these

segments follow:

Segment 1 Segment 2 Segment 3

Contribution to indirect expenses $ 432,000 $ 208,800 $ 72,000

Assets directly used by and identified

with the segment 3,600,000 1,440,000 360,000

a. Calculate the return on investment for each segment. Rank them from highest to lowest.

b. Assume the cost of capital is 10% for a segment. Calculate the residual income for each

segment. Rank them from highest to lowest.

c. Repeat (b), but assume the desired cost of capital is 14 per cent. Rank the segments from highest

to lowest.

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