Please answer the following question, Please make sure its rounded to the Round

Question

Please answer the following question, Please make sure its rounded to the Round answers to three decimal places.)

ROI and Residual Income:Basic Computations

Watkins Associated Industries is a highly diversified company with three divisions: Trucking, Seafood, and Construction. Assume that the company uses return on investment and residual income as two of the evaluation tools for division managers. The company has a minimum desired rate of return on investment of 10 percent with a 30 percent tax rate. Selected operating data for three divisions of the company follow.

(a) Compute the return on investment for each division. (Round answers to three decimal places.)
Trucking ROI = Answer

Seafood ROI = Answer

Construction ROI = Answer

(b) Compute the residual income for each division.

Trucking Division Seafood Division Construction Division Sales $1,000,000 $690,000 $900,000 Operating assets 500,000 230,000 380,000 Net operating income 99,000 58,000 57,000

Explanation / Answer

answer for a)

ROI:(net operating income/operating assets)×100

Trucking ROI:($99000/$500000)×100

=19.8%

Seafood ROI:($58000/$230000)×100

=25.22%

Construction ROI:($57000/$380000)×100

=15%

Answer for b)

71428.57

($500000×10%×100/70)

32857.14

($230000×10%×100/70)

54285.71

($380000×10%×100/70)

Residual income Trucking($) Seafood($) construction($) Net operating income 99000 58000 57000 Minimum level

71428.57

($500000×10%×100/70)

32857.14

($230000×10%×100/70)

54285.71

($380000×10%×100/70)

Residual income 27571.43 25142.86 2814.29

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