A Utility Corporation uses the investment center concept for the service stations that it manages in the city. Consolidated has a 15% required rate of return on investment in order for a branch station to be viable. Select operating data for three of its stations for 2017 are as follows: Demon Street Angel Street Elves Street Revenue $17,000,000 $13,500,000 $15,000,000 Operating Assets $7,000,000 $7,000,000 $6,000,000 Net Operating Income $900,000 $1,200,000 $980,000 Required: Compute the return on investment for each station Which station manager is doing best based only on ROI? Why? Are any of the stations in danger of being closed due to lack of performance?
A Utility Corporation uses the investment center concept for the service stations that it manages in the city. Consolidated has a 15% required rate of return on investment in order for a branch station to be viable. Select operating data for three of its stations for 2017 are as follows: Demon Street Angel Street Elves Street Revenue $17,000,000 $13,500,000 $15,000,000 Operating Assets $7,000,000 $7,000,000 $6,000,000 Net Operating Income $900,000 $1,200,000 $980,000 Required: Compute the return on investment for each station Which station manager is doing best based only on ROI? Why? Are any of the stations in danger of being closed due to lack of performance?
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter19: Capital Investment
Section: Chapter Questions
Problem 17E: Postman Company is considering two independent projects. One project involves a new product line,...
Related questions
Question
100%
A Utility Corporation uses the investment center concept for the service stations that it manages in the city. Consolidated has a 15% required rate of
| Demon Street | Angel Street | Elves Street | |
| Revenue | $17,000,000 | $13,500,000 | $15,000,000 |
| Operating Assets | $7,000,000 | $7,000,000 | $6,000,000 |
| Net Operating Income | $900,000 | $1,200,000 | $980,000 |
Required:
- Compute the return on investment for each station
- Which station manager is doing best based only on ROI? Why?
- Are any of the stations in danger of being closed due to lack of performance?
- What other factors should be included when evaluating the managers?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 4 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Century 21 Accounting Multicolumn Journal
Accounting
ISBN:
9781337679503
Author:
Gilbertson
Publisher:
Cengage
Cornerstones of Cost Management (Cornerstones Ser…
Accounting
ISBN:
9781305970663
Author:
Don R. Hansen, Maryanne M. Mowen
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Century 21 Accounting Multicolumn Journal
Accounting
ISBN:
9781337679503
Author:
Gilbertson
Publisher:
Cengage
Financial And Managerial Accounting
Accounting
ISBN:
9781337902663
Author:
WARREN, Carl S.
Publisher:
Cengage Learning,
Managerial Accounting
Accounting
ISBN:
9781337912020
Author:
Carl Warren, Ph.d. Cma William B. Tayler
Publisher:
South-Western College Pub