Luke Company has three divisions: Peak, View, and Grand. The company has a hurdle rate...
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Luke Company has three divisions: Peak, View, and Grand. The company has a hurdle rate of 5.26 percent. Selected operating data for the three divisions follow: Peak View Grand Sales revenue $ 334,000 $ 237,000 $ 315,000 Cost of goods sold 200,000 110,000 200,000 Miscellaneous operating expenses 36,000 37,000 37,000 Average invested assets 1,250,000 940,000 1,065,000
Required: 1. Compute the return on investment for each division. 2. Compute the residual income for each division.
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