FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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ated based on return on investment (ROI). The manager of the Automotive Sunroofs Division is evaluated based on residual income.The required return is 12% and the return on investment has been 16% for the two divisions. Each manager is currently considering a project with the following projections (in$000s):
|
Residential
Skylights
|
Automotive
Sunroofs
|
|
| Projected operating income | $350 | $560 |
| Investment in operating assets | $2,500 | $4,000 |
Required
a. What is the Residential Skylights’ ROI?
b. What is Automotive Sunroofs’ residual income?
c. According to the current evaluation system for managers, which manager(s) would have incen-
tive to undertake the project
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