Orange Corp. has two divisions: Fruit and Flower. The following information for the past year is available for each division: Fruit Division Flower Division 2,610,000 1,957, 500 652,500 Sales revenue Cost of goods sold and operating expenses 1,740,000 1,392,000 348,000 Net operating income Average invested assets 3,480,000 2,718,750 Orange has established a hurdle rate of 6 percent Required: 1-a. Compute each division's return on investment (ROI) and residual income for last year. 1-b. Determine which manager seems to be performing better. 2. Suppose Orange is investing in new technology that will increase each division's operating income by $131,000. The total investment required is $2,200,000, which will be split evenly between the two divisions. Calculate the ROI and residual Income for each division after the investment is made. 3. Determine whether both managers will support the investment.

Orange Corp. has two divisions: Fruit and Flower. The following information for the past year is available for each division: Fruit Division Flower Division 2,610,000 1,957, 500 652,500 Sales revenue Cost of goods sold and operating expenses 1,740,000 1,392,000 348,000 Net operating income Average invested assets 3,480,000 2,718,750 Orange has established a hurdle rate of 6 percent Required: 1-a. Compute each division's return on investment (ROI) and residual income for last year. 1-b. Determine which manager seems to be performing better. 2. Suppose Orange is investing in new technology that will increase each division's operating income by $131,000. The total investment required is $2,200,000, which will be split evenly between the two divisions. Calculate the ROI and residual Income for each division after the investment is made. 3. Determine whether both managers will support the investment.

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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