Watkins associated industries is a highly diversified company with three divisions:
Tucking, Seafood, and construction. Assume that the company uses return on investment And residual income as two of the evaluation tools for division managers. The company Has a minimum desired rate of return on investment of 10 percent with a 30 percent Tax rate. Selected operating data for three divisions of the company follow.
|
Trucking Division
|
Seafood Division
|
Construction Division
|
|
Sales
|
$1,200,000
|
$750,000
|
$900,000
|
|
Operating assets
|
600,000
|
250,000
|
350,000
|
|
Net operating income
|
102,000
|
56,000
|
59,000
|
- Compute the return on investment for each division. (Round answers to three decimal places.)
- Compute the residual income for each division