Fruit Division 24 Flower Division Sales revenue Cost of goods sold and operating expenses Net operating income 1,800,000 1,440,000 2$ $2,700,000 2,025,000 360,000 675,000 Average invested assets 24 3,600,000 $ 2,812,500 Orange has established a hurdle rate of 6 percent. Required: 1-a. Compute each division's return on investment (ROI) and residual income for last year. 1-b. Determine which manager seems to be performing better. 2. Suppose Orange is investing in new technology that will increase each division's operating income by $133,000. The total investment required is $2,300,000, which will be split evenly between the two divisions. Calculate the ROI and residual income for each division after the investment is made. 3. Determine whether both managers will support the investment.

Fruit Division 24 Flower Division Sales revenue Cost of goods sold and operating expenses Net operating income 1,800,000 1,440,000 2$ $2,700,000 2,025,000 360,000 675,000 Average invested assets 24 3,600,000 $ 2,812,500 Orange has established a hurdle rate of 6 percent. Required: 1-a. Compute each division's return on investment (ROI) and residual income for last year. 1-b. Determine which manager seems to be performing better. 2. Suppose Orange is investing in new technology that will increase each division's operating income by $133,000. The total investment required is $2,300,000, which will be split evenly between the two divisions. Calculate the ROI and residual income for each division after the investment is made. 3. Determine whether both managers will support the investment.

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter26: Capital Budgeting (capbud)

Section: Chapter Questions

Problem 5R

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