Consider the following sales and operating data for the three divisions of a conglomerate:
|
Division A
|
Division C
|
Division C
|
|
Sales
|
$140,000
|
$180,000
|
$250,000
|
|
Operating income
|
$ 5,000
|
$ 6,300
|
$ 14,400
|
|
Operating assets
|
$ 20,000
|
$ 35,000
|
$ 90,000
|
|
Minimum required rate of return
|
10%
|
19%
|
20%
|
(a) Compute the return on investment (ROI) for each division.
(b) Assume that each division is provided with an investment opportunity that could produce 20 percent return on investment. Which divisions would accept or reject it?