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Q1) The Gean Corporation had net operating income of $380,000 and average operating assets of $2,000,000. The corporation needs a return on investment of 18%.

problems:

a) Compute company's return on investment (ROI) and residual income (RI).

b) Gean Corporation is considering investment of $70,000 in project which will create annual net operating income of $12,950. Would it be in best interests of company to make this investment?

c) Gean Corporation is considering investment of $70,000 in project which will create annual net operating income of $12,950. If division planning to generate the investment present has return on investment of 20% and its manager is estimaetd based on division's ROI, will division manager be inclined to request funds to make this investment?

d) Gean Corporation is considering investment of $70,000 in project which will create annual net operating income of $12,950. If division planning to make investment currently has residual income of $50,000 and its manager is estimated based on division's residual income, will division manager be inclined to request funds to make this investment?

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M917879

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