Detroit Motors' Mustang division had operating income of $700,000 and net assets of $4,000,000. Detroit Motors has
Question:
Detroit Motors' Mustang division had operating income of $700,000 and net assets of $4,000,000. Detroit Motors has a target rate of return of 16 percent.
(a) Calculate the return on investment. (Round your answer to three decimal places.)
Answer
(b) Calculate the residual income.
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(c) The Mustang Division has the opportunity to increase operating income by $200,000 with a $950,000 investment in assets.
1. Calculate the Mustang Division's return on investment if the project is carried out. (Round your answer to three decimal places.)
Answer
2. Calculate the residual income of the Mustang Division if the project is carried out.
$Response
Cornerstones of Managerial Accounting
ISBN: 978-0176530884
2nd Canadian edition
Authors: Maryanne M. Mowen, Don Hanson, Dan L. Heitger, David McConomy, Jeffrey Pittman