Sales$ 12,000,000$ 14,000,000$ 25,000,000Average operating assets$ 3,000,000$ 7,000,000$ 5,000,000Net operating income$ 600,000$ 560,000$ 800,000Minimum required rate of return14%10%16%
Required:
Compute each division’s margin, turnover, and return on investment (ROI).
Compute each division’s residual income (loss).
Assume each division is presented with an investment opportunity yielding a 15% rate of return.
If performance is being measured by ROI, which division or divisions will accept the opportunity?
If performance is being measured by residual income, which division or divisions will accept the opportunity?