Domestic The Western Division of Claremont Company had net operating Income of $137,000 and average Invested assets of $555,000.Claremont has a required rate of return of 13.50 percent. Western has an opportunity to increase operating Income by $49,000 with a$101,000 Increase in average invested assets.Compute Western Division's return on Investment and residual income currently and if it undertakes the project. (Enter your ROIanswers as a percentage rounded to two decimal places, (l.e., 0.1234 should be entered as 12.34%). Round your Residual Income(Loss) answers to the nearest whole dollar.)Return on Investment (ROI)Residual Income (Loss)CurrentProposed Project%

Both ROI and RI are important metrics in business. ROI is used to evaluate the efficiency of an…

Answered: The Western Division of Claremont…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 4P

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Database Systems is considering expansion into a new product line. Assets to support expansion will cost $890,000. It is estimated that Database can generate $1,860,000 in annual sales, with an 13 percent profit margin. What would net income and return on assets (investment) be for the year? (Input your return on assets answer as a percent rounded to 2 decimal places.) Net Income Return on assets 96
Mr. Sy is the general manager of the XXX Division, and his performance is measured using the residual income method. Mr. Sy is reviewing the following forecasts to his division for the next year:Category AmountsWorking Capital P 1,800,000Revenue 30,000,000Plant and Equipment 17,200,000If the imputed interest charge is 15% and Mr. Sy wants to achieve a residual income of P2,000,000 what will costs (total expenses) have to be in order to achieve the targeted residual income?
A division with capital employed of sh.400, 000 currently earns an ROI of 22%. It can make an additional investment of sh.50, 000 for a five-year life with nil residual value. The average net profit from this investment would be sh.12, 000 after depreciation. The division’s cost of capital is 14%. What are the residual incomes before and after the investment? Select one: A. Sh. 37,000; sh. 32,000 B. Sh. 32,000; sh. 37,000 C. Sh. 47,000, sh. 32,000 D. Sh. 47,000; sh. 37,000
Banyan Industries has two divisions, a tax rate of 30%, and a minimum rate of return of 20%. Division A has a weighted average cost of Capital of 9.5% and is looking at a new project that will generate a profit of $1,200,000 from a machine that costs $4,000,000. Division B has a weighted average cost of capital of 9.5% and is looking at a new project that will generate a profit of $1,350,000 from a machine that costs $5,000.000. A. Calculate the EVA for each of Banyans divisions. B. Calculate the RI for each of Banyans division. C. If Banyan uses EVA to evaluate the projects, which division has the better project and by how much? D. If Banyan uses RI, which division has the better project and by how much? E. What are some of the reasons for the similarity or difference that you found in the use of EVA versus RI?
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The Gustavo Industries in São Paulo, Brazil, reported the following results for 2020 (currency in Brazilian real, R$): Sales R$ 400,000,000Variable costs 320,000,000Controllable fixed costs 40,800,000Average operating assets 280,000,000 Gustavo’s Management is considering the following independent courses of action in 2021 in order to maximize the return on investment for this division: - Option1: Reduce average operating assets by R$ 80,000,000 with no change in controllable margin.- Option2: Increase sales R$ 80,000,000 with no change in the contribution margin percentage. A. Compute the controllable margin and the return on investment for 2020. B. Compute the controllable margin and the expected return on investment for each proposed option.
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1. The A Division of Sam Products Co. is considering an investment in a new project. The project has an estimated cost of P1,000,000. If Sam Products Co. has a target rate of return of 12%, how large does the return on investment on this project need to be to generate P170,000 of residual income? 2. Sam Division reported a residual income of P200,000 for the year just ended. The division has P8,000,000 of invested capital and P1,000,000 of income. On the basis of this information, the required rate of return was: (round off to 1 decimal places) 3. If the turnover increased by 40 percent and the margin decreased by 30 percent, the ROI would decreased by?
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An investment-center manager is considering three possible investments. The company's required return is 10%. The required asset investment, controllable margins, and the ROIs of each investment are as follows: Project Average Investment Controllable Margin AA BB CC $175,000 155,000 235,000 $51,110 35,170 84,900 The investment center is currently generating an ROI of 23% based on $1,215,000 in operating assets and a controllable margin of $295,000 If the manager can select only one project, determine which is the best choice to increase the investment center's ROI by computing the investment center's ROI for each of the investment alternatives. (Round answer to 1 decimal place, e.g. 52.5.) CC is the best choice and ROI will be 36.2 %.

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