please do not propvide solution in image format thank you! The Monarch Division of Allgood Corporation has a current ROI of 14 percent. The company's target ROI is 10 percent. TheMonarch Division has an opportunity to invest $6,000,000 at 12 percent but is reluctant to do so because its ROI will fall to 13.20percent. The present investment base for the division is $9,000,000.Requireda. Calculate the current residual income and the residual income with the new investment opportunity being included.b. Based on your answers to requirement a, should Monarch Division make the investment?a. Current residual incomea. New residual incomeb. Should Monarch Division make the investment?

Residual income is an profit earned after paying all cost of investment. A.Current residual Income =…

Answered: The Monarch Division of Allgood…

EBK CFIN

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ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter10: Project Cash Flows And Risk

Section: Chapter Questions

Problem 18PROB

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Forchen, Inc., provided the following information for two of its divisions for last year: Required: 1. For the Small Appliances Division, calculate: a. Average operating assets b. Margin c. Turnover d. Return on investment (ROI) 2. For the Cleaning Products Division, calculate: a. Average operating assets b. Margin c. Turnover d. Return on investment (ROI) 3. What if operating income for the Small Appliances Division was 2,000,000? How would that affect average operating assets? Margin? Turnover? ROI? Calculate any changed ratios (round to four significant digits).
The condensed income statement for the Consumer Products Division of Tri-State Industries Inc. is as follows (assuming no support department allocations): The manager of the Consumer Products Division is considering ways to increase the return on investment. a. Using the DuPont formula for return on investment, determine the profit margin, investment turnover, and return on investment of the Consumer Products Division, assuming that 143,750,000 of assets have been invested in the Consumer Products Division. b. If expenses could be reduced by 3,450,000 without decreasing sales, what would be the impact on the profit margin, investment turnover, and return on investment for the Consumer Products Division?
Company A has current sales of $4,000,000 and a 45% contribution margin. Its fixed costs are $600,000. Company B is a service firm with current service revenue of $2,800,000 and a 15% contribution margin. Company Bs fixed costs are $375,000. Compute the degree of operating leverage for both companies. Which company will benefit most from a 15% increase in sales? Explain why.
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 Monarch Division of Allgood Corporation has a current ROI of 12 percent. The company target ROI is 8 percent. The Monarch Division has an opportunity to invest $4,800,000 at 10 percent but is reluctant to do so because its ROI will fall to 11.25 percent. The present investment base for the division is $8,000,000.Required Calculate the current residual income and the residual income with the new investment opportunity being included. Based on your answers to requirement a, should Monarch Division make the investment?
Lucas is the X Division manager and his performance is evaluated by executive management based on Division ROI. The current controllable margin for X Division is P46,000. Its current operating assets total P210,000. The division is considering purchasing equipment for P40,000 that will increase sales by an estimated P10,000, with annual depreciation of P10,000. If the equipment is purchased, what is the new ROI (round-off the final answer to one decimal places)?
The New York Division of Ram Co. currently earns an ROI of 18%. The department manager is considering a new project, which requires a $100,000 investment in operating assets and generates a net operating income of $16,000. Assume that the company’s minimum required rate of return is 14%. Which of the following statement is true? a)If the manager is evaluated based on ROI, she will make the new investment because it increases the department’s ROI by 2%. b)If the manager is evaluated based on ROI, she will make the new investment because it generates an ROI that is 2% greater than the company’s minimum required rate of return. c)If the manager is evaluated based on residual income, she will make the new investment because it increases the department’s residual income by $2,000. d)If the manager is evaluated based on residual income, she will not make the new investment because it decreases the department’s residual income by $2,000.
Utopia Corporation has a Return of Investment (ROI) of 13%. One of its divisions, which currently has a 15% ROI is given the opportunity to invest in a project. The project will reduce the division's ROI but produce $120,000 of residual income (RI). If Utopia strives for goal congruence, the investment: Multiple Choice should not be acquired because it reduces divisional ROI should not be acquired because the division's ROI is already higher than the overall corporation's ROI should be acquired because it produces an additional $120,000 of RI for the corporation should not be acquired as there is an opportunity cost to Utopia should not be acquired because the division's ROI and RI give different results
NUBD is evaluating its X Division, an investment center. The division has a P50,000 controllable margin and P300,000 of sales. How much will NUBD’s average operating assets be when its return on investment is 10%?
Standard Media has a required rate of return of 5 percent, a cost of capital of 4 percent, and an income tax rate of 30 percent. The following information about its two divisions has been provided by management: Audio Division Video Division NOPAT $1,400,000 $2,000,000 Sales $10,000,000 $12,500,000 Invested capital $15,000,000 $17,500,000 How much is the ROI of the Audio Division?
Mr. Sy is the general manager of the XXX Division, and his performance is measured using the residual income method. Mr. Sy is reviewing the following forecasts to his division for the next year:Category AmountsWorking Capital P 1,800,000Revenue 30,000,000Plant and Equipment 17,200,000If the imputed interest charge is 15% and Mr. Sy wants to achieve a residual income of P2,000,000 what will costs (total expenses) have to be in order to achieve the targeted residual income?
The current controllable margin for Henry Division is $93,000. Its current operating assets are $300,000. The division is considering purchasing equipment for $90,000 that will increase annual controllable margin by an estimated $15,000. If the equipment is purchased, what will happen to the return on investment for Henry Division?

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