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1. Compute the margin, turnover, and return on investment (ROI) in 2005 for each of FedE's four business segments (Hint: page 99 reports total segment assets for each business segment.)

2. Assume that FedEx established a minimum required rate of return of 15% for each of its business segments. Compute the residual income earned in 2005 in each of FedEx's four segments.

3. Assume that the senior managers of FedEx Express and FedEx Ground each have an investment opportunity that would require $20 million of additional operating assets and that would increase operating income by $4 million. If FedEx evaluates all of its senior managers using ROI, would the managers of both segments pursue the investment opportunity? If FedEx evaluates all of its senior managers using residual income, would the managers of both segments pursue the investment opportunity?

 

Basic Finance, Finance

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