Question: Requirements 5 and 6 please! Using ROI and RI to evaluate investment centers Benjamin Doore is a national paint manufacturer and retailer. The company is
Requirements 5 and 6 please!
| Using ROI and RI to evaluate investment centers | |||||||||||||
| Benjamin Doore is a national paint manufacturer and retailer. The company is segmented into five divisions: | |||||||||||||
| Paint Stores (branded retail locations), Consumer (paint sold through home improvement stores), | |||||||||||||
| Automotive (sales to auto manufacturers), International, and Administration. The following is selected | |||||||||||||
| divisional information for its two largest divisions: Paint Stores and Consumer: | |||||||||||||
| Net Sales | Operating Income | Average Total Assets | |||||||||||
| Paint Stores | $4,010,000 | $482,000 | $1,385,000 | ||||||||||
| Consumer | 1,280,000 | 185,000 | 1,585,000 | ||||||||||
| Management has specified a 19% target rate of return. | |||||||||||||
| Requirements | |||||||||||||
| 1.) | Calculate each division's ROI. Round all of your answers to four decimal places. | ||||||||||||
| 2.) | Calculate each division's profit margin ratio. Interpret your results. | ||||||||||||
| 3.) | Calculate each division's asset turnover ratio. Interpret your results. | ||||||||||||
| 4.) | Use the expanded ROI formula to confirm your results from Requirement 1. Interpret your results. | ||||||||||||
| 5.) | Calculate each division's RI. Interpret your results. Offer a recommendation for any division with negative RI. | ||||||||||||
| 6.) | Describe some of the factors that management considers when setting its minimum target rate of return. | ||||||||||||
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