Megamart provides the following information on its two investment centers. Investment Center Sales Income Average Assets Electronics
Question:
Megamart provides the following information on its two investment centers.
| Investment Center | Sales | Income | Average Assets |
|---|---|---|---|
| Electronics | $ 45,000,000 | $ 3,420,000 | $ 18,000,000 |
| Sporting goods | 25,200,000 | 2,520,000 | 14,000,000 |
1. Compute return on investment for each center. Using return on investment, which center is most efficient at using assets to generate income? 2. Assume a target income of 11% of average assets. Compute residual income for each center. Which center generated the most residual income? 3. Assume the Electronics center is presented with a new investment opportunity that will yield a 15% return on investment. Should the new investment opportunity be accepted? The target return is 11%.
Compute return on investment for each center. Using return on investment, which center is most efficient at using assets to generate income?
| Return on Investment | ||||
| Numerator: | / | Denominator: | ||
| / | = Return on Investment | |||
| Electronics | / | = | ||
| Sporting Goods | / | = | ||
| Which center is most efficient at using assets to generate income? | / |
- Required 1
- Required 2
- Required 3
Assume a target income of 11% of average assets. Compute residual income for each center. Which center generated the most residual income?
| Investment Center | Electronics | Sporting Goods |
| Income | ||
| Less target income | ||
| Residual income | ||
| Which center generated the most residual income? |
Expert Answer:
Answer 1 Compute return on investment for each center Using return on investment which center is mos... View the full answer
