Orange Corp. has two divisions: Fruit and Flower. The following information for the past year is...

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Accounting

Orange Corp. has two divisions: Fruit and Flower. The followinginformation for the past year is available for eachdivision:
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.

Required:
1. Compute each division’s return on investment(ROI) and residual income for last year.
2. Suppose Orange is investing in new technologythat will increase each division’s operating income by $120,000.The total investment required is $1,500,000, which will be splitevenly between the two divisions. Calculate the ROI and residualincome for each division after the investment is made. Enter ROI asa percentage rounded to 2 decimal places.

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1 Return on Investments Net operating income Average invested assets Particulars Fruit division Flower division 1 Net income 165000 247500 2 Average invested assets 2062500 1375000 Return on investment 12 8 18 See Answer

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	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