Using 16 percent as the minimum required rate of return


Consider the following:


000s omitted



Division A

Division B

Operating assets

$5,000

$12,500

Operating income

$1,000

$ 2,250

ROI

20%

18%

1. Which is the more successful division in terms of KOI?

2. Using 16 percent as the minimum required rate of return, compute the residual income for each division. Which division is more successful under this rate?

 

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Financial Accounting: Using 16 percent as the minimum required rate of return
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