Coolbrook Company has the following information available for the past year: Riv

Question

Coolbrook Company has the following information available for the past year: River Division Stream Division Sales revenue $ 1,204,000 $ 1,804,000 Cost of goods sold and operating expenses Net operating income Average invested assets 885,000 1,285,000 $ 319,000 519,000 $ 1,070,000 1,410,000 The company's hurdle rate is 6.76 percent. Required: 1. Calculate return on investment (ROI) and residual income for each division for last year. (Do not round your intermediate calculations. Round "ROl" answers to 2 decimal places.) River Division Stream Division ROI Residual Income

Explanation / Answer

ROI = Net operating income × sales revenue

Sales revenue Average invested assets

Residual income = net operating income - ( average invested asset × hurdle rate )

B)

C)

D)

River stream ROI 29.81% 36.81% Residual income $247,310 $423,684

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