Orange Corp. has two divisions: Fruit and Flower. The following information for the past year...
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Accounting
Orange Corp. has two divisions: Fruit and Flower. The following information for the past year is available for each division:
| Fruit Division | Flower Division | ||||
| Sales revenue | $ | 660,000 | $ | 990,000 | |
| Cost of goods sold and operating expenses | 495,000 | 742,500 | |||
| Net operating income | $ | 165,000 | $ | 247,500 | |
| Average invested assets | $ | 2,062,500 | $ | 1,375,000 | |
Orange has established a hurdle rate of 5 percent.
1. Suppose Orange is investing in new technology that will increase each divisions operating income by $120,000. The total investment required is $1,500,000, which will be split evenly between the two divisions. Calculate the ROI and return on investment for each division after the investment is made. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.))
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2. Which manager will accept the investment.
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