Eastern Merchants shows the following information for its two divisions for year one.
Eastern Western
Revenue....................................1,200,000 3,800,000
Cost of sales................................769,500 1,900,000
Allocated corporate overhead..... 72,000 228,000
Other general and admin. ...........158,500 1,100,000
The results for year two have been posted:
Eastern Western
Revenue................................ 1,200,000 2,800,000
Cost of sales......................... 769,500 1,400,000
Allocated corporate overhead... 90,000 210,000
Other general and admin. ............158,500 1,100,000
REQUIRED:
Compute divisional operating income for the two divisions for year two. Ignore taxes. How well have these divisions performed?
TL division of Giant Bank has assets of $14.4 billion. During the past year the division had profits of $1.8 billion. Giant bank has a cost of capital of 8 percent. Ignore taxes.
REQUIRED:
1. Compute the divisional ROI.
2. Compute the divisional RI.