4. The following information is provided: Project Income Investment P 33,000 P 56,250 P 27,500 A P 300,000 P 750,000 в P 550,000 Assume the division's current ROI is 10% and the firm's minimum required rate of return is 7%. If you were the president of the company, which projects would you want the division manager to accept? a. A only. b. B inly. c. A, B, and C, d. A and C only. e. A and B only.

4. The following information is provided: Project Income Investment P 33,000 P 56,250 P 27,500 A P 300,000 P 750,000 в P 550,000 Assume the division's current ROI is 10% and the firm's minimum required rate of return is 7%. If you were the president of the company, which projects would you want the division manager to accept? a. A only. b. B inly. c. A, B, and C, d. A and C only. e. A and B only.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Shalom Company provided the following data pertaining to its Peace Department: Margin on sales Minimum required rate of return Return on investment Turnover Average operating assets Sales 10% 18% 25% 2.50 40,000 100,000 Suppose you were presented Project Piss that has ROI of 22% and residual income of P1,900. Will Peace Department consider accepting the project? Yes or no? Use the underlined words as your choice. Input answers in capital letters.
Use the following information to answer the questions. Company X $ 12,480,000 $ 3,120,000 561,600 8.00% Company Y $ 28,480,000 $ 7,120,000 2$ Company Z $ 20,480,000 $ 5,120,000 532,480 Sales Average operating assets Net operating income Minimum required rate of return $ 512,640 8.50% 10.40% Required: 1. Compute the return on investment (ROI) for each company using the formula stated in terms of margin and turnover. 2. Compute the residual income (loss) for each company. 3. Each company is presented with an investment opportunity that would yield a 9% rate of return. a. Assume performance is measured based on ROI. Indicate whether each company will likely accept or reject the investment opportunity. b. Assume performance is measured based on residual income. Indicate whether each company will likely accept or reject the investment opportunity. Complete this question by entering your answers in the tabs below. Req 1 Req 2 Req ЗA Req 3B Each company is presented with an investment…
1. Roy Toy, a division of Fun Corp. has a net operating income of $60000 and average operating assets of $300000. The required rate of return for the company is 15%. What is the division's residual income? a. $240000 b. $45000 c. $15000 d. $51000 2. If the manager of Roy To division is evaluated based on residual income, will she want to make an investment of $100000 that would generate an additional net operating income of $18000 per year?a. Yesb. No
Use the following information to answer the questions. Company X $ 12,480,000 $ 3,120,000 $ Company Y $ 28,480,000 $ 7,120,000 512,640 8.50% Company Z $ 20,480,000 $ 5,120,000 532,480 10.40% Sales Average operating assets Net operating income Minimum required rate of return 561,600 8.00% Required: 1. Compute the return on investment (ROI) for each company using the formula stated in terms of margin and turnover. 2. Compute the residual income (loss) for each company. 3. Each company is presented with an investment opportunity that would yield a 9% rate of return. a. Assume performance is measured based on ROI. Indicate whether each company will likely accept or reject the investment opportunity. b. Assume performance is measured based on residual income. Indicate whether each company will likely accept or reject the investment opportunity. Complete this question by entering your answers in the tabs below. Req 1 Req 2 Reg ЗA Req 3B Compute the return on investment (ROI) for each company…
Case 1: ROI You are comparing the performance of two (2) separate divisions, segments A and B, using ROI Analysis. A в P100,000.00 P500,000.00 30,000.00 Sales Operating Expenses 300,000.00 Net Operating income 70,000.00 200,000.00 Average Operating Assets 10,000.00 40,000.00 Required: Using ROI Analysis, which segment is performing better? To answer this question, you need to: 1. Compute the ROi of each segment and 2. Compute the components of ROI of each segment
Q4. As a manager you are presented with a $10,000 investment opportunity that will yield $1,600 in additional operating income. The manager’s division is currently operating at 17% ROI. If the company’s minimum acceptable return is 15%, what will happen to the company’s residual income if the investment is accepted by the manager? A. It will increase by $1,500 B. It will increase by $1,600 C. It will increase by $100 D. It will increase by $200 Answer: _________
7. Responsibility Accounting: a. What is a cost center? Give an example of a cost center b. What is a Profit center? Give an example of a profit center c. What is an investment center? Give an example of an investment center d. What is management by exception: e. The Hydride Division of Murdoch Corporation is an investment center. It has $1,000,000 of operating assets. During 2022, the Hydride Division earned operating income of $400,000 on $5,000,000 of sales. Murdoch's companywide return on investment or desired rate of return is approximately 20% SHOW WORK FOR CREDIT! 1. What is the ROI? 2. What is the margin? 3. What is the turnover? 4. What is the residual income?
15. The manager of the Cement Division expects the following results in 2022: Sales Variable Costs (60%) Contribution Margin P 49.600,00O 29, 760,000 19,840.000 Fixed Costs Profit P 7.840,000 The Division's investments are as follows: Plant equipment Working Capital ROI P 19,510.000 P 14.880.00O 22.8% The division has a target ROI of 30 percent, and the rmanager has asked you to determine how much sales volume the division would need in order to realize that. He states that the sales mix is relatively constant so variable costs should be close to 60 percent of sales, fixed costs and plant and equipment should remain constant, and working capital should vary closely with sales in the percentage reflected above. 15. The peso sales that the division needs in order to realize the 30 percen ROI target is: O a. P 19,829,032 O b. P 57,590,322 O c. P 44,373,871 O d. P 59,510,000
Return on investment is often expressed as follows: d. Requirements 1. What are the advantages of breaking down the computation into two separate components? 2. Fill in the blanks for the following table: Revenues Income Investment Income as a percentage of revenues Investment turnover ROI Requirement 2. Fill in the blanks for the following table: (Enter investment turnover to the nearest tenth, X.X.) Companies in Same Industry B Income and investment alone shed investment or to its A 1,400,000 $ 210,000 $ 700,000 % Company B does % income. 1,100,000 165,000 % Income Income Revenues Investment Revenues Investment 3% C Now comment on the relative performance of these companies as thoroughly as the data permit. light on comparative performances. Thus, we Company B should emphasize increasing investment turnover by reducing percentage of revenues by increasing only its 5,500,000 1.5% 2.0 = % Company A in terms of income margin. Company B has a Company A's. Company C's income as a…
Roy Toys, a division of Fun Corp. has a net operating income of $60,000 and average operating assets of $300000. 1. The required rate of return for the company is 15%. What is the division's ROI?a. 25%b. 5%c. 15%d. 20% 2. If the manager of the division is evaluated based on ROI, will she want to make an investment of $100000 that would generate an additional net operating income of $18000 per year?a. Yesb. No
4. Return on Investment, Residual Income & ROI Pricing For each of the following independent cases, the minimum desired Return on Investment (ROI) is 20%. Division LBM P 700,000 P 42,000 (5) (6) (7). (8) P 22,000 Sales Operating Income Operating Assets Margin Turnover Return on Investments Residual Income Division Lugaw P 400,000 (1). (2) 15% (3). 30% (4). Division Lugaw Unit selling price: P 20 Total fixed costs: P 100,000 Division LBM • Unit selling price: P 700 Total fixed costs: P 258,000 REQUIRED: 1. Compute for each division's missing items (1) to (8). 2. How many more units shall be sold by Lugaw to achieve a 40% ROI? 3. How much increase in selling price will allow LBM to reach 50% ROI from its current unit sales?
B. Calculate the profit margin, return on investment, and residual income. Assume an investment base of $100,000 and 6% cost of capital. Round your percentage answers to one decimal place. Profit margin Return on investment Residual income 2.20 a ✓ % 4.2 ✓ % C. Which of the following statements is correct? Uncontrollable costs are included in the income statement because a. these costs ultimately affect each division. b. these costs are the responsibility of each division manager. c. these costs are non-recurring. d. these costs are head office's responsibility.