Coolbrook Company has the following information available for the past year: Riv
ID: 2448283 • Letter: C
Question
Coolbrook Company has the following information available for the past year:
River
Division Stream Division
Sales revenue $ 1,205,000 $ 1,815,000
Cost of goods sold and operating expenses
896,000
1,290,000
Net operating income $ 309,000 $ 525,000
Average invested assets $ 1,130,000 $ 1,480,000
The company’s hurdle rate is 7.76 percent.
Required for each Part:
ROI in % for River Division: ??
ROI in % for Stream Division: ??
Residual Income for River Division: ??
Residual Income for Stream Division:??
1.
Calculate return on investment (ROI) and residual income for each division for last year. (Do not round your intermediate calculations. Round "ROI" answers to 2 decimal places.)
2.
Recalculate ROI and residual income for each division for each independent situation that follows:
a.
Operating income increases by 11 percent. (Do not round your intermediate calculations. Round "ROI" answers to 2 decimal places.)
b.
Operating income decreases by 9 percent. (Do not round your intermediate calculations. Round "ROI" answers to 2 decimal places.)
c.
The company invests $254,000 in each division, an amount that generates $118,000 additional income per division. (Do not round your intermediate calculations. Round "ROI" answers to 2 decimal places.)
d.
Coolbrook changes its hurdle rate to 5.76 percent. (Do not round your intermediate calculations. Round "ROI" answers to 2 decimal places.)
Explanation / Answer
Coolbrook Company has the following information available for the past year: Riv