Problem: Bleach and Cleanser. Because of different accounting methods and inflation rates, the company is considering multiple evaluation measures. The following information is provided for 2009:
Bleach Division Cleanser Division
ASSETS:
Book Value $225,000 $450,000
Current Value $300,000 $250,000
INCOME:
Book Value $150,000 $100,000
Current Value $155,000 $105,000
The company is currently using a 15% required rate of return.
Q1. What are Bleach and Cleanser's respective return on investment based on book value?
a 0.22 and 0.67
b 0.42 and 0.52
c 0.52 and 0.42
d 0.67 and 0.22
Q2. What are Bleach and Cleanser's respective return on investment based on current values?
a 0.22 amd 0.67
b 0.42 and 0.52
c 0.52 and 0.42
d 0.67 and 0.22
Q3. What are Bleach and Cleanser's residual incomes based on book values, respectively?
a $116,250 and $32,500
b $110,000 and $67,500
c $67,500 and $110,000
d $37,500 and $116,250