Franklin Company has operating assets of $20,300,000. The company's operating income for the most recent accounting period was $2,710,000. The Dannica Division of Franklin controls $6,960,000 of the company's assets and earned $1,210,000 of its operating income. Franklin's desired ROI is 11 percent. Franklin has $1,090,000 of additional funds to invest. The manager of the Dannica division believes that his division could earn $149,000 on the additional funds. The highest investment opportunity to any of the company's other divisions is 12 percent. Required a. Calculate the ROI of Dannica Division. (1) Before investment opportunity. (2) Only on the new investment opportunity. (3) Dannica total ROI if investment opportunity is accepted. c. Calculate the Dannica Division residual income from the new investment opportunity. If residual income is used as the sole performance measure, would the manager of the Dannica Division be likely to accept or reject the additional funding? Complete this question by entering your answers in the tabs below. Required A Required C Calculate the ROI of Dannica Division. Note: Round your percentage answers to 2 decimal places. (i.e., 0.2345 should be entered as 23.45). (1) Before investment opportunity. (2) Only on the new investment opportunity. (3) Dannica total ROI if investment opportunity is accepted. ROI (1) (2) % % (3) % Show less A
Franklin Company has operating assets of $20,300,000. The company's operating income for the most recent accounting period was $2,710,000. The Dannica Division of Franklin controls $6,960,000 of the company's assets and earned $1,210,000 of its operating income. Franklin's desired ROI is 11 percent. Franklin has $1,090,000 of additional funds to invest. The manager of the Dannica division believes that his division could earn $149,000 on the additional funds. The highest investment opportunity to any of the company's other divisions is 12 percent. Required a. Calculate the ROI of Dannica Division. (1) Before investment opportunity. (2) Only on the new investment opportunity. (3) Dannica total ROI if investment opportunity is accepted. c. Calculate the Dannica Division residual income from the new investment opportunity. If residual income is used as the sole performance measure, would the manager of the Dannica Division be likely to accept or reject the additional funding? Complete this question by entering your answers in the tabs below. Required A Required C Calculate the ROI of Dannica Division. Note: Round your percentage answers to 2 decimal places. (i.e., 0.2345 should be entered as 23.45). (1) Before investment opportunity. (2) Only on the new investment opportunity. (3) Dannica total ROI if investment opportunity is accepted. ROI (1) (2) % % (3) % Show less A
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Rahul
Transcribed Image Text:Franklin Company has operating assets of $20,300,000. The company's operating income for the most recent accounting period was
$2,710,000. The Dannica Division of Franklin controls $6,960,000 of the company's assets and earned $1,210,000 of its operating
income. Franklin's desired ROI is 11 percent. Franklin has $1,090,000 of additional funds to invest. The manager of the Dannica division
believes that his division could earn $149,000 on the additional funds. The highest investment opportunity to any of the company's
other divisions is 12 percent.
Required
a. Calculate the ROI of Dannica Division.
(1) Before investment opportunity.
(2) Only on the new investment opportunity.
(3) Dannica total ROI if investment opportunity is accepted.
c. Calculate the Dannica Division residual income from the new investment opportunity. If residual income is used as the sole
performance measure, would the manager of the Dannica Division be likely to accept or reject the additional funding?
Complete this question by entering your answers in the tabs below.
Required A
Required C
Calculate the ROI of Dannica Division.
Note: Round your percentage answers to 2 decimal places. (i.e., 0.2345 should be entered as 23.45).
(1) Before investment opportunity.
(2) Only on the new investment opportunity.
(3) Dannica total ROI if investment opportunity is accepted.
ROI
(1)
(2)
%
%
(3)
%
Show less A
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