Use the following information to answer the questions. Company X $ 12,480,000 $ 3,120,000 561,600 8.00% Company Y $ 28,480,000 $ 7,120,000 512,640 8.50% Company Z $ 20,480,000 $ 5,120,000 $ Sales Average operating assets Net operating income Minimum required rate of return 532,480 10.40% Required: 1. Compute the return on investment (ROI) for each company using the formula stated in terms of margin and turnover. 2. Compute the residual income (loss) for each company. 3. Each company is presented with an investment opportunity that would yield a 9% rate of return. a. Assume performance is measured based on ROI. Indicate whether each company will likely accept or reject the investment opportunity. b. Assume performance is measured based on residual income. Indicate whether each company will likely accept or reject the investment opportunity. Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Req 3A Reg 3B Compute the residual income (loss) for each company. (Do not round intermediate calculations. Loss amounts should be indicated by a minus sign.) Company X Company Y Company z Residual income (loss) < Req 1 Req 3A >
Use the following information to answer the questions. Company X $ 12,480,000 $ 3,120,000 561,600 8.00% Company Y $ 28,480,000 $ 7,120,000 512,640 8.50% Company Z $ 20,480,000 $ 5,120,000 $ Sales Average operating assets Net operating income Minimum required rate of return 532,480 10.40% Required: 1. Compute the return on investment (ROI) for each company using the formula stated in terms of margin and turnover. 2. Compute the residual income (loss) for each company. 3. Each company is presented with an investment opportunity that would yield a 9% rate of return. a. Assume performance is measured based on ROI. Indicate whether each company will likely accept or reject the investment opportunity. b. Assume performance is measured based on residual income. Indicate whether each company will likely accept or reject the investment opportunity. Complete this question by entering your answers in the tabs below. Req 1 Reg 2 Req 3A Reg 3B Compute the residual income (loss) for each company. (Do not round intermediate calculations. Loss amounts should be indicated by a minus sign.) Company X Company Y Company z Residual income (loss) < Req 1 Req 3A >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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