Coolbrook Company has the following information available for the past year: Riv
ID: 2519155 • Letter: C
Question
Coolbrook Company has the following information available for the past year: River Division Stream S 1,211,000 S 1,817,000 S 327,000 S 528,000 Division Sales revenue Cost of goods sold arid operaling expenses Net operating income Average invested assets 34,000 1,239,000 The cormpany's hurdle rate is 7.76 percent. Required: 1. Calculate return on investment Rol and residual income for each division for last ear. Enter your ROI answers as a percentage rounded to two decimal places. i.e 0.1234 should be entered as 12.34%. River Division RO Residual Income iLoss) 2. Recalculate ROl and residual income for each division for each independent situation that follows: (Enter your ROl answers as a percentage rounded to two decimal places, (i.e. 0.1234 should be entered as 12.34%)) a. Operating income increases by 9 percent. Stream Division River Division ROI Rcsidual Income (Loss)Explanation / Answer
PARTICULARS RIVER DIVISON STREAM DIVISION SALES 1211000 1817000 COST 884000 1289000 NET INCOME 327000 528000 INVEST MENT 1190000 1590000 SOLUTION 1 ROI (INCOME/ INVESTED ASSETS) 27.48 33.21 RESIDUAL INCOME OPERATING INCOME-AVERAGE ASSETS*HURDLE RATE OPERATING INCOME-AVERAGE ASSETS*HURDLE RATE 327000-1190000*7.76/100 528000-1590000*7.76/100 234656 404616 SOLUTION 2A OPERATING INCOME INCREASE BY 9 PERCENT NET INCOME 356430 575520 INVEST MENT 1190000 1590000 ROI (INCOME/ INVESTED ASSETS) 29.95 36.20 RESIDUAL INCOME OPERATING INCOME-AVERAGE ASSETS*HURDLE RATE OPERATING INCOME-AVERAGE ASSETS*HURDLE RATE 356430-1190000*7.76/100 575520-1590000*7.76/100 264086 452136