Please answer part C Use list below to answer part C Exercise 22-20 (Part Level
ID: 2531659 • Letter: P
Question
Please answer part C
Use list below to answer part C
Exercise 22-20 (Part Level Submission) Presented below is selected information for three regional divisions of Medina Company. Divisions North West South $399,300 $209,100 Contribution $301,000 $50 margin Controllable $140,600 margin Average operating $937,333 $2,004,444 $1,394,000 assets Minimum rate of return 0,500 $360,800 12 % 14 % 10% Your answer is correct. Compute the return on investment for each division. (Round ROI to 0 decimal places, e.g. 15.) North Division West Division South Division 151 % 18 % 151 %Explanation / Answer
Answer for Part C :
Given that each division has investment opportunity of 16 % Rate of Return
Workings
Particular
North
West
South
Avg. Operating Assets
937333
2004444
1394000
Controllable Margin
140600
360800
209100
Current ROI
15%
18%
15%
Investment Opportunity Return
16%
16%
16%
Effect on ROI if opportunity is accepted
Increased
Decreased
Increased
Accept or reject decision
North and South Division will accept the opportunity.
Particular
North
West
South
Avg. Operating Assets
937333
2004444
1394000
Controllable Margin (A)
140600
360800
209100
Charges for Use of Capital (B)
28120
80178
69700
Minimum required rate of return
12%
14%
10%
Investment Opportunity Return
16%
16%
16%
Effect on ROI if opportunity is accepted
Increased
Increase
Increased
Accept or reject decision
All three Division will accept investment opportunity.
Particular
North
West
South
Avg. Operating Assets
937333
2004444
1394000
Controllable Margin
140600
360800
209100
Current ROI
15%
18%
15%
Investment Opportunity Return
16%
16%
16%
Effect on ROI if opportunity is accepted
Increased
Decreased
Increased
Accept or reject decision
Accept Reject Accept