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

50.1K

Verified Solution

Question

Accounting

Orange Corp. has two divisions: Fruit and Flower. The followinginformation for the past year is available for each division: FruitDivision Flower Division Sales revenue $ 1,260,000 $ 1,890,000 Costof goods sold and operating expenses 945,000 1,323,000 Netoperating income $ 315,000 $ 567,000 Average invested assets $6,300,000 $ 2,362,500 Orange has established a hurdle rate of 4percent. Required: 1-a. Compute each division’s return oninvestment (ROI) and residual income for last year. (Enter your ROIanswers as a percentage rounded to two decimal places, (i.e.,0.1234 should be entered as 12.34%.)) 1-b. Determine which managerseems to be performing better. Fruit Division Flower Division 2.Suppose Orange is investing in new technology that will increaseeach division’s operating income by $140,000. The total investmentrequired is $2,000,000, which will be split evenly between the twodivisions. Calculate the ROI and return on investment for eachdivision after the investment is made. (Enter your ROI answers as apercentage rounded to two decimal places, (i.e., 0.1234 should beentered as 12.34%.)) 3. Which manager will accept theinvestment.

Answer & Explanation Solved by verified expert

3.9 Ratings (435 Votes)

Answer to Part 1a Return on Investment Margin Turnover Margin Net Operating Income Sales 100 Turnover Sales Average Invested Assets Fruit Division Margin 315000 1260000 100 Margin 25 Turnover 1260000 6300000 Turnover 02 Return on Investment 25 See Answer

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:

Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!

Become a Member

Transcribed Image Text

Orange Corp. has two divisions: Fruit and Flower. The followinginformation for the past year is available for each division: FruitDivision Flower Division Sales revenue $ 1,260,000 $ 1,890,000 Costof goods sold and operating expenses 945,000 1,323,000 Netoperating income $ 315,000 $ 567,000 Average invested assets $6,300,000 $ 2,362,500 Orange has established a hurdle rate of 4percent. Required: 1-a. Compute each division’s return oninvestment (ROI) and residual income for last year. (Enter your ROIanswers as a percentage rounded to two decimal places, (i.e.,0.1234 should be entered as 12.34%.)) 1-b. Determine which managerseems to be performing better. Fruit Division Flower Division 2.Suppose Orange is investing in new technology that will increaseeach division’s operating income by $140,000. The total investmentrequired is $2,000,000, which will be split evenly between the twodivisions. Calculate the ROI and return on investment for eachdivision after the investment is made. (Enter your ROI answers as apercentage rounded to two decimal places, (i.e., 0.1234 should beentered as 12.34%.)) 3. Which manager will accept theinvestment.