Johnson Ceramics, a division of Sesnie Corporation, has an operating income of $64,000 and total assets...

 

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Johnson Ceramics, a division of Sesnie Corporation, has an operating income of $64,000 and total assets of $400,000. The required rate of return for the company is 9%. The company is evaluating whether it should use return on investment (ROI) or residual income (RI) as a measurement of performance for its division managers. The manager of Johnson Ceramics has the opportunity to undertake a new project that will require an investment of $100,000. This investment would earn $14,000 for the company. Read the requirements. Requirement 1. What is the original return on investment (ROI) for Johnson Ceramics (before making any additional investment)? First determine the formula to calculate the ROI. Requirements Operating income + Total assets (Enter the percentage to two decimal places.) The original return on investment (ROI) for Johnson Ceramics is ROI 16 %. Requirement 2. What would the ROI be for Johnson Ceramics if this investment opportunity were undertaken? Would the manager of two decimal places.) If this investment opportunity were undertaken, the ROI would be 15.6%. If the manager of this division is evaluated based on ROI she would not want to make this investment. Investing in the new project wo Requirement 3. What is the ROI of the investment opportunity? Would the investment be desirable from the standpoint of Sesnie Corp The ROI of the investment opportunity is 14 %. From the standpoint of Sesnie Corporation this investment is desirable. The ROI of the investment opportunity is more than Ses Requirement 4. What would the residual income (RI) be for Johnson Ceramics if this investment opportunity were to be undertaken? V First determine the formula to calculate the RI. 1. What is the original return on investment (ROI) for Johnson Ceramics (before making any additional investment)? 2. What would the ROI be for Johnson Ceramics if this investment opportunity were undertaken? Would the manager of the Johnson Ceramics division want to make this investment if she were evaluated based on ROI? Why or why not? 3. What is the ROI of the investment opportunity? Would the investment be desirable from the standpoint of Sesnie Corporation? Why or why not? 4. What would the residual income (RI) be for Johnson Ceramics if this investment opportunity were to be undertaken? Would the manager of the Johnson Ceramics division want to make this investment if she were evaluated based on RI? Why or why not? 5. What is the RI of the investment opportunity? Would the investment be desirable from the standpoint of Sesnie Corporation? Why or why not? 6. Which performance measurement method, ROI or RI, promotes goal congruence? Why? Print Done Operating income ( Total assets x Target rate of return RI (Use parentheses or a minus sign for a negative RI.) The residual income (RI) for Johnson Ceramics if this investment opportunity were to be undertaken is If the manager of this division is evaluated based on RI she would $ 33,000. want to make this investment. The positive RI indicates that the division is earning more than management's expectations. Requirement 5. What is the RI of the investment opportunity? Would the investment be desirable from the standpoint of Sesnie Corporation? Why or why not? (Use parentheses or a minus sign for a negative RI.) The RI of the investment opportunity is 4000 the percentage to y or why not? Johnson Ceramics, a division of Sesnie Corporation, has an operating income of $64,000 and total assets of $400,000. The required rate of return for the company is 9%. The company is evaluating whether it should use return on investment (ROI) or residual income (RI) as a measurement of performance for its division managers. The manager of Johnson Ceramics has the opportunity to undertake a new project that will require an investment of $100,000. This investment would earn $14,000 for the company. Read the requirements. Requirement 1. What is the original return on investment (ROI) for Johnson Ceramics (before making any additional investment)? First determine the formula to calculate the ROI. Requirements Operating income + Total assets (Enter the percentage to two decimal places.) The original return on investment (ROI) for Johnson Ceramics is ROI 16 %. Requirement 2. What would the ROI be for Johnson Ceramics if this investment opportunity were undertaken? Would the manager of two decimal places.) If this investment opportunity were undertaken, the ROI would be 15.6%. If the manager of this division is evaluated based on ROI she would not want to make this investment. Investing in the new project wo Requirement 3. What is the ROI of the investment opportunity? Would the investment be desirable from the standpoint of Sesnie Corp The ROI of the investment opportunity is 14 %. From the standpoint of Sesnie Corporation this investment is desirable. The ROI of the investment opportunity is more than Ses Requirement 4. What would the residual income (RI) be for Johnson Ceramics if this investment opportunity were to be undertaken? V First determine the formula to calculate the RI. 1. What is the original return on investment (ROI) for Johnson Ceramics (before making any additional investment)? 2. What would the ROI be for Johnson Ceramics if this investment opportunity were undertaken? Would the manager of the Johnson Ceramics division want to make this investment if she were evaluated based on ROI? Why or why not? 3. What is the ROI of the investment opportunity? Would the investment be desirable from the standpoint of Sesnie Corporation? Why or why not? 4. What would the residual income (RI) be for Johnson Ceramics if this investment opportunity were to be undertaken? Would the manager of the Johnson Ceramics division want to make this investment if she were evaluated based on RI? Why or why not? 5. What is the RI of the investment opportunity? Would the investment be desirable from the standpoint of Sesnie Corporation? Why or why not? 6. Which performance measurement method, ROI or RI, promotes goal congruence? Why? Print Done Operating income ( Total assets x Target rate of return RI (Use parentheses or a minus sign for a negative RI.) The residual income (RI) for Johnson Ceramics if this investment opportunity were to be undertaken is If the manager of this division is evaluated based on RI she would $ 33,000. want to make this investment. The positive RI indicates that the division is earning more than management's expectations. Requirement 5. What is the RI of the investment opportunity? Would the investment be desirable from the standpoint of Sesnie Corporation? Why or why not? (Use parentheses or a minus sign for a negative RI.) The RI of the investment opportunity is 4000 the percentage to y or why not?

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Requirement 1 To calculate the original Return on Investment ROI for Johnson Ceramics we use the formula ROI Operating income Total assets 100 Given O... View the full answer