Essentials Of Investments
11th Edition
ISBN: 9781260013924
Author: Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher: Mcgraw-hill Education,
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For performance evaluation, Victory Inc. considers each of its three vacation resorts separately. Each is considered an Investment Center. “Fun” Resort had Revenue of $1,200,000 and Variable Costs of $310,000 and Fixed Costs of $650,000 so the subunit’s Operating Income was $240,000. “Pamper” Resort had Revenue of $3,185,000 and Variable Costs of $995,000 and Fixed Costs of $1,680,000 so the subunit’s Operating Income was $510,000. “Relax” Resort had Revenue of $1,400,000 and Variable Costs of $375,000 and Fixed Costs of $725,000 so the subunit’s Operating Income was $300,000.
REQUIRED:
For each subunit, calculate Return on Investment, DuPont components of Return on Investment, and Residual Income. Then provide a final performance ranking of the subunits by first, second, and third place and explain why you ranked them in that way.
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