Question - Calculating Return on Investment, Residual Income

Lowry Company has sales of $125,000, cost of goods sold of $70,000, operating expenses of $20,000, average invested assets of $400,000, and a hurdle rate of 8 percent. Calculate Lowry's return on investment and its residual income

Question - Calculating Return on Investment, Residual Income

Rally Corp's Eastern Division has sales of $190,000, cost of goods sold $110,000, operating expenses of $35,000, average invested assets of $900,000, and a hurdle rate of 12 percent. Calculate the Eastern Division's return on investment and its residual income.

The Alpha Division of Mayfield Company had an operating income of $135,000 and net assets of $560,000. Mayfield has a required rate of return of 14 percent. Alpha has an opportunity to increase operating income by $32,000 with a $92,000 investment in assets. Compute Alpha Division's return on investment and residual income currently and if it undertakes the project.