Problem $25\mathrm{.}1$A $($Algo$)$ Empire Hotel $($LO$25-2,$ LO$25-3,$ LO$25-4)$

The Empire Hotel is a full$-$service hotel in a large city. Empire is organized into three departments that

are treated as investment centers. Budget information for the coming year for these three departments is

shown as follows. The managers of each of the departments are evaluated and bonuses are awarded

each year based on ROI.

Required

a$.$ Compute the ROI for each department. Use the DuPont method to analyze the return on sales and

capital turnover.

Assume the Health Spa is considering installing new exercise equipment. Upon investigating, the

manager of the division finds that the equipment would cost $$75,000$ and that operating earnings would

increase by $$13,500$ per year as a result of the new equipment.

b$-1.$ What is the ROI of the investment in the new exercise equipment? What impact does the investment

in the exercise equipment have on the Health Spa's ROI?

b$-2.$ Would the manager of the Health Spa be motivated to undertake such an investment?

c$-1.$ Compute the residual income for each department if the minimum required return for the Empire

Hotel is $16$ percent.

c$-2.$ What would be the impact of the investment in part b on the Health Spa's residual income?

Complete this question by entering your answers in the tabs below.

Req B$1$

Compute the ROI for each department. Use the DuPont method to analyze the return on sales and capital turn

Note: Round your percentage answers to $2$ decimal places $($i$.$e$.,0\mathrm{.}1234$ should be considered as $12\mathrm{.}34.)$