Selected sales
and operating data for three divisions of three different companies
are given below:
Division A     Division B   Division C   
  Sales $ 7,000,000 $ 11,000,000 $ 10,100,000
  Average operating assets $ 1,750,000 $ 5,500,000 $ 2,525,000
  Net
operating income
$ 427,000 $ 1,111,000 $ 338,350
  Minimum required rate of return 20 % 20.2 % 17 %
Required:
1.

Compute the return on investment (ROI) for each division, using
the formula stated in terms of margin and turnover. (Do not
round intermediate calculations. Round your answers to 2 decimal
places.)

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Margin Turnover ROI
  Division A %       %  
  Division B %       %  
  Division C %       %  
2.

Compute the residual income for each division. (Negative
amounts should be indicated by a minus sign. Leave no cells blank –
be certain to enter “0” wherever required.)

       Division A        Division B       Division C
  Residual income $
  
$
  
$
  
3.

Assume that each division is presented with an investment
opportunity that would yield a rate of return of 22%.

a.

If performance is being measured by ROI, which division or
divisions will probably accept or reject the opportunity?

  Division A (Click to
select)AcceptReject   
  Division B (Click to
select)RejectAccept   
  Division C (Click to
select)AcceptReject   
b.

If performance is being measured by residual income, which
division or divisions will probably accept or reject the
opportunity?

  Division A (Click to
select)AcceptReject   
  Division B (Click to
select)AcceptReject   
  Division C (Click to
select)AcceptReject   

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