Cole has a desired ROI of 10 percent. Headquarters has $96,000 of funds to assig
ID: 2500921 • Letter: C
Question
Cole has a desired ROI of 10 percent. Headquarters has $96,000 of funds to assign to its investment centers. The manager of the Morrison Division has an opportunity to invest the funds at an ROI of 12 percent. The other two divisions have investment opportunities that yield only 11 percent.
Calculate the new ROI for Morrison division, if the investment opportunity is adopted by Morrison?
Problem 9-21A Comparing return on investment and residual income
Cole Corporation operates three investment centers. The following financial statements apply to the investment center named Morrison Division.
Fundamental Managerial Accounting Concepts, 7th edition
Cole has a desired ROI of 10 percent. Headquarters has $96,000 of funds to assign to its investment centers. The manager of the Morrison Division has an opportunity to invest the funds at an ROI of 12 percent. The other two divisions have investment opportunities that yield only 11 percent.
Explanation / Answer
ROI = Net income /Average investment in asset
= 28500/197682
= .1442 or 14.42 %