Red Earth Company has two divisions, the Okla Division and theHoma Division. Last year, the Okla Division earned $66,000 usingaverage operating assets of $550,000. Last year, the Homa Divisionearned $260,000 using average operating assets of $2,000,000.Minimum required rate of return for Red Earth is 9 percent.
A. For the Okla Division, residual incomeis
B. For the Homa Division, residual incomeis
Now assume that the minimum required rate of return for RedEarth is 12 percent. If an amount is zero, enter "0".
C. For the Okla Division, residual incomeis
D. For the Homa Division, residual incomeis
Red Earth Company has two divisions, the Okla Division and theHoma Division. Last year, the Okla Division earned $66,000 usingaverage operating assets of $550,000. Last year, the Homa Divisionearned $260,000 using average operating assets of $2,000,000.Minimum required rate of return for Red Earth is 9 percent.
A. For the Okla Division, residual incomeis
B. For the Homa Division, residual incomeis
Now assume that the minimum required rate of return for RedEarth is 12 percent. If an amount is zero, enter "0".
C. For the Okla Division, residual incomeis
D. For the Homa Division, residual incomeis
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Related questions
Rains Nickless Ltd. of Australia has two divisions that operatein Perth and Darwin. Selected data on the two divisions follow: |
Division | ||||
| Perth | Darwin | |||
| Sales | $ | 7,170,000 | $ | 20,600,000 |
| Net operatingincome | $ | 530,580 | $ | 1,297,800 |
| Average operatingassets | $ | 2,390,000 | $ | 10,300,000 |
| Required: | |
| 1. | Compute the return on investment (ROI) for each division.(Do not round intermediate calculations. Round your answersto 2 decimal places. Omit the "%" sign in yourresponse.) |
| Perth | Darwin | |
| ROI | % | % |
| 2. | Assume that the company evaluates performance using residualincome and that the minimum required rate of return for anydivision is 9%. Compute the residual income for each division.(Omit the "$" sign in your response.) |
| Perth | Darwin | |
| Residual income | $ | $ |
| 3. | Is the Darwin Divisionâs greater residual income an indicationthat it is better managed? | ||||
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