Blue Devil Corp. has two sources of funds: long-term debt and equity capital. The company has profit centers in the following regions with the following net incomes and total assets: Net Income Assets North America $800,000 $10,000,000 Asia 1,170,000 12,000,000 Europe 680,000 8,000,000 Required: a. Calculate ROI for each profit center, and identify which region has the best performance. Round your answer to two decimal places. b. Calculate the residual income for each profit center based on a desired ROI of 8.5%, and identify which region’s performance is below the company’s expectation.

Blue Devil Corp. has two sources of funds: long-term debt and equity capital. The company has profit centers in the following regions with the following net incomes and total assets: Net Income Assets North America $800,000 $10,000,000 Asia 1,170,000 12,000,000 Europe 680,000 8,000,000 Required: a. Calculate ROI for each profit center, and identify which region has the best performance. Round your answer to two decimal places. b. Calculate the residual income for each profit center based on a desired ROI of 8.5%, and identify which region’s performance is below the company’s expectation.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter9: Responsibility Accounting And Decentralization

Section: Chapter Questions

Problem 3PB: The income statement comparison for Rush Delivery Company shows the income statement for the current...

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The income statement comparison for Rush Delivery Company shows the income statement for the current and prior year. A. Determine the operating income (loss) (dollars) for each year. B. Determine the operating income (percentage) for each year. C. The company made a strategic decision to invest in additional assets in the current year. These amounts are provided. Using the total assets amounts as the investment base, calculate the ROI. Was the decision to invest additional assets in the company successful? Explain. D. Assuming an 8% cost of capital, calculate the RI for each year. Explain how this compares to your findings in part C.
Johnson Company has two sources of funds: long-term debt and equity capital. Johnson Company has profit centers in the following locations with the following net incomes and total assets: Net Income Assets Las Vegas $1,260,000 $4,000,000 Dallas 1,500,000 8,000,000 Tampa 2,340,000 12,000,000 a. Calculate ROI for each profit center and rank them from highest to lowest based on ROI. Round ROI to the nearest whole percentage. ROI Rank Las Vegas Answer Answer123 Dallas Answer Answer123 Tampa Answer Answer123 b. Calculate residual income for each profit center based on a desired ROI of 5% and rank them from highest to lowest based on residual income. ROI Rank Las Vegas Answer Answer123 Dallas Answer Answer123 Tampa Answer Answer123
Return on Investment and Residual IncomeJohnson Company has two sources of funds: long-term debt and equity capital. Johnson Company has profit centers in the following locations with the following net incomes and total assets: Net Income Assets Las Vegas $760,000 $4,000,000 Dallas 1,000,000 8,000,000 Tampa 1,840,000 12,000,000 a. Calculate ROI for each profit center and rank them from highest to lowest based on ROI. Round ROI to the nearest whole percentage. ROI Rank Las Vegas Answer Answer Dallas Answer Answer Tampa Answer Answer b. Calculate residual income for each profit center based on a desired ROI of 5% and rank them from highest to lowest based on residual income. ROI Rank Las Vegas Answer Answer Dallas Answer Answer Tampa Answer Answer
Yale Corporation had the following results last year (in thousands). Management's target rate of return is 20% and the weighted average cost of capital is 15%. Its effective tax rate is 30%. Sales $25,000,000 Operating income 1,000,000 Total assets 2,000,000 Current liabilities 5,670,000 What is the division's Return on Investment (ROI)?
Kelfour Enterprises has divided its operations into two divisions. Relevant accounting data for each division is as follows: Divisions Sales Operating Assets Operating Income Western Division $ 330,000 $ 280,000 $ 33,000 Eastern Division $ 480,000 $ 330,000 $ 34,500 Kelfour has an additional $68,000 of funds to invest. The manager of the Western Division believes that she can invest the funds at a rate of return (ROI) of 23.00% while the manager of the Eastern Division has found a new investment opportunity that is expected to yield a 21.00% ROI. Kelfour uses residual income (RI) to evaluate managerial performance. The company wide desired ROI is 19.00%. Based on this information Multiple Choice The manager of the Western Division would accept the $68,000 additional investment opportunity because it would increase the Division's RI by $2,720. The manager of the Eastern Division would accept the $68,000 additional investment…
Macon Mills is a division of Bolin Products, Inc. During the most recent year, Macon had a net income of $36 million. Included in the income was interest expense of $3,100,000. The company's tax rate was 40%. Total assets were $470 million, current liabilities were $102,000,000, and $73,000,000 of the current liabilities are noninterest bearing. What are the invested capital and ROI for Macon? Enter your answer in whole dollar. Round "ROI" answer to two decimal places.
The R&B Division of MoTown Recording Corporation defines return as after-tax income and had the following results last year. Sales $10,000,000 Operating income $ 2,200,000 Average total invested capital $4,000,000 Current liabilities $ 2,500,000 Management's target rate of return is 12% and the weighted average cost of capital is 9%. Its effective tax rate is 40%. Calculate the return on investment (ROI). IMPORTANT: Provide your answer in the following format: 0.## (Your answer must be in decimal format). Answer:
For its three investment centers, Gerrard Company accumulates the following data: I II III Sales $2,062,000 $3,914,000 $3,905,000 Controllable margin 848,640 2,161,620 4,103,120 Average operating assets 4,992,000 8,006,000 12,068,000 Compute the return on investment (ROI) for each center. I II III The return on investment % % % eTextbook and Media
For its three investment centers, Gerrard Company accumulates the following data: I II III Sales $2,000,000 $4,000,000 $4,000,000 Controllable margin 1,400,000 2,000,000 3,600,000 Average operating assets 5,000,000 8,000,000 10,000,000 Compute the return on investment (ROI) for each center. I II III The return on investment enter percentages % enter percentages % enter percentages %
Consider the following data (in millions) from Trident Financial Inc., which has two main divisions, mortgage loans and consumer loans: Mortgage Loans Consumer Loans Average total assets $ 1,200 $ 21,500 Operating income $ 255 $ 2,795 Return on investment (ROI) 21.25 % 13.00 % Required: 1. Based on ROI, which division is more successful? multiple choice Mortgage loans Consumer loans 2. Trident uses residual income (RI) as a measure of the financial performance of its divisions. What is the RI for each division if the minimum desired rate of return is (a) 10%, (b) 15%, and (c) 20%? (Leave no cells blank. Enter "0" wherever required. Negative amounts should be indicated by a minus sign. Enter your answers in millions of dollars, rounded to nearest whole number.)
For its three investment centres, National Inc. accumulates the following data: Centre I Centre II Centre III Sales $2,000,000 $4,000,000 $4,000,000 Operating income 1,300,000 1,840,000 2,880,000 Average Operating Assets 5,000,000 8,000,000 12,000,000 Minimum required return 15% 20% 25% 1.) What is the return on investment (ROI) for Centre I? a. 20% b. 23% c. 24% d. 26% 2.)The residual income (RI) for Centre III is a. $150,000 b. $550,000 c. $240,000 d. -$120,000 3.)The ranking of the centres based on return on investment (ROI) with the best performer listed first is as follows a. Centre I, Centre II, Centre III b. Centre I, Centre III, Centre II c. Centre III, Centre II, Centre I d. Centre II, centre III, Centre I 4.)What is the return on investment (ROI) for Centre II? a. 20% b. 23% c. 24% d. 26%
The Hasting Sugar Corporation has the following pattern of net income each year, and associated capital expenditure projects. The firm can earn a higher return on the projects than the stockholders could earn if the funds were paid out in the form of dividends. Year 1: net income $13 million, Profitable Capital Expenditure $7 million Year 2 : net income 20 million profitable capital expenditure 12 million Year 3: net income 18 million profitable capital expenditure 6 million Year 4: net income 14 million profitable capital expenditure 8 million Year 5: net income 19 million profitable capital expenditure 9 million The Hastings Corporation has 3 million shares outstanding. If the firm simply uses a payout ratio of 20% net income, how much in total cash dividends will be paid? if the firm pays a 20% stock dividend in years 2 through 5, and also pays a cash dividend of $3.40 per share for each of the five years, how much in total dividends will be paid? Assume the payout ratio in each…