PA10-1 (Algo) Calculating Return on Investment, Residual Income, Determining Effect of Changes Sales, Expenses, Invested Assets, Hurdle Rate on Each [LO 10-4, 10-5] Coolbrook Company has the following information available for the past year: Sales revenue Cost of goods sold and operating expenses Net operating income Average invested assets The company's hurdle rate is 6.51 percent. River Division $ 1,212,000 885,000 $ 327,000 $ 1,110,000 Stream Division $ 1,817,000 1,299,000 $ 518,000 $ 1,490,000 Required: 1. Calculate return on investment (ROI) and residual income for each division for last year. 2. Recalculate ROI and residual income for each division for each independent situation that follows: Complete this question by entering your answers in the tabs below. a. Operating income increases by 9 percent. b. Operating income decreases by 11 percent. c. The company invests $253,000 in each division, an amount that generates $110,000 additional income per division. d. Coolbrook changes its hurdle rate to 4.51 percent.

PA10-1 (Algo) Calculating Return on Investment, Residual Income, Determining Effect of Changes Sales, Expenses, Invested Assets, Hurdle Rate on Each [LO 10-4, 10-5] Coolbrook Company has the following information available for the past year: Sales revenue Cost of goods sold and operating expenses Net operating income Average invested assets The company's hurdle rate is 6.51 percent. River Division $ 1,212,000 885,000 $ 327,000 $ 1,110,000 Stream Division $ 1,817,000 1,299,000 $ 518,000 $ 1,490,000 Required: 1. Calculate return on investment (ROI) and residual income for each division for last year. 2. Recalculate ROI and residual income for each division for each independent situation that follows: Complete this question by entering your answers in the tabs below. a. Operating income increases by 9 percent. b. Operating income decreases by 11 percent. c. The company invests $253,000 in each division, an amount that generates $110,000 additional income per division. d. Coolbrook changes its hurdle rate to 4.51 percent.

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter11: Performance Evaluation And Decentralization

Section: Chapter Questions

Problem 27E: Margin, Turnover, Return on Investment, Average Operating Assets Elway Company provided the...

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E10-7 (Algo) Calculating Return on Investment, Residual Income, Determining Effect of Changes in Sales, Expenses, Invested Assets, Hurdle Rate on Each [LO 10-4, 10-5] Kaler Company has sales of $1,270,000, cost of goods sold of $750,000, other operating expenses of $163,000, average invested assets of $3,700,000, and a hurdle rate of 12 percent. Required: 1. Determine Kaler's return on investment (ROI), investment turnover, profit margin, and residual income. 2. Several possible changes Kaler could face in the upcoming year follow. Determine each scenario's impact on Kaler's ROI and residual income. (Note: Treat each scenario independently.) a. Company sales and cost of goods sold increase by 15 percent. b. Operating expenses increase by $76,000. c. Operating expenses decrease by 20 percent. d. Average invested assets decrease by $315,000. e. Kaler changes its hurdle rate to 9 percent. Complete this question by entering your answers in the tabs below. Req 1 Req 2A Req 2B Req 2C Req 2D…
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