The following data pertain to Dakota Division's most recent year of operations. Income $ 16,000,000 185,000,000 62,000,000 Sales revenue Average invested capital Assume that the company's minimum desired rate of return on invested capital is 14 percent. Required: Compute Dakota Division's residual income for the year. Residual income
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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.Division A of Kern Co. has sales of $350,000, cost of goods sold of $200,000, operating expenses of $30,000, and invested assets of $600000. What is the return on investment for Division A? A. 20% B. 25% C. 33% D. 40%Use the following information for Exercises 11-31 and 11-32: Washington Company has two divisions: the Adams Division and the Jefferson Division. The following information pertains to last years results: Washingtons actual cost of capital was 12%. Exercise 11-32 Residual Income Refer to the information for Washington Company above. In addition, Washington Companys top management has set a minimum acceptable rate of return equal to 8%. Required: 1. Calculate the residual income for the Adams Division. 2. Calculate the residual income for the Jefferson Division.
- The income statement comparison for Forklift Material Handling 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 return on investment. Was the decision to invest additional assets in the company successful? Explain. D. Assuming an 8% cost of capital, calculate the residual income for each year. Explain how this compares to your findings in part C.Margin, Turnover, Return on Investment, Average Operating Assets Elway Company provided the following income statement for the last year: At the beginning of last year, Elway had 28,300,000 in operating assets. At the end of the year, Elway had 23,700,000 in operating assets. Required: 1. Compute average operating assets. 2. Compute the margin and turnover ratios for last year. (Note: Round the answer for margin ratio to two decimal places.) 3. Compute ROI. (Note: Round answer to two decimal places.) 4. CONCEPTUAL CONNECTION Briefly explain the meaning of ROI. 5. CONCEPTUAL CONNECTION Comment on why the ROI for Elway Company is relatively high (as compared to the lower ROI of a typical manufacturing company).The following data pertain to Waramutse's most recent year of operations. Income $ 12,500,000 Sales revenue 220,000,000 Average invested capital 51,000,000 Assume that the company’s minimum desired rate of return on invested capital is 11 percent. Required: Compute Waramutse’s residual income for the year
- The following results are available for Division X and Y:Division X Division YProfit before interest and tax P185 000 P172, 000Capital employed P1, 540, 000 P1, 650, 000The cost of capital is 10%.Calculate and comment on the performance of the departments based on:a. Return on capital employed (4 marks)b. Residual incomSam Division reported a residual income of P200,000 for the year just ended. The division had P8,000,000 of invested capital and P1,000,000 of income. On the basis of this information, the required rate of return was: (round-off to 1 decimal places)The following are available for divison X and Y Profit before interest and tax X 185 000 Y172 000 Capital employed X 1 540 000 Y 1 650 000 The cost of capital is 10% comment on the performance of the departments based on a. Return on capital employed b.residual income
- Back Mountain Industries (BMI) has two divisions: East and West. BMI has a cost of capital of 15 percent. Selected financial information (in thousands of dollars) for the first year of business follows: East West Sales revenue $ 1,000 $ 5,000 Income 200 390 Investment (beginning of year) 2,000 3,000 Current liabilities (beginning of year) 200 200 R&D expendituresa 500 400 aR&D is assumed to benefit two periods. All R&D is spent at the beginning of the year. Required: a-1. Evaluate the performance of the two divisions assuming BMI uses return on investment (ROI).The Rainy Division of Seattle Corporation reported the following results from the past year. Shareholders require a return of 11% Management calculated a weighted-average cost of capital (WACC) of 2%. Rainy's corporate tax rate is 30 %. Sales $900.000 Operating income $225,000 Total assets $1,700,000 Current liabilities $800,000 What is the division's Residual Income (RI)?Lasky Manufacturing has two divisions: Carolinas and Northeast. Lasky has a cost of capital of 7.5 percent. Selected financial information (in thousands of dollars) for the first year of business follows: Carolinas Northeast Sales revenue $ 900 $ 4,200 Income 170 372 Divisional assets (beginning of year) 1,000 1,500 Current liabilities (beginning of year) 170 170 R&D expendituresa 450 370 aR&D is assumed to benefit two periods. All R&D is spent at the beginning of the year. Required: a-1. Evaluate the performance of the two divisions assuming Lasky Manufacturing uses residual income. a-2. Which division had the better performance?