Consider the following:
|
000s omitted
|
|
|
Division A
|
Division B
|
|
Operating assets
|
$5,000
|
$12,500
|
|
Operating income
|
$1,000
|
$ 2,250
|
|
ROI
|
20%
|
18%
|
1. Which is the more successful division in terms of KOI?
2. Using 16 percent as the minimum required rate of return, compute the residual income for each division. Which division is more successful under this rate?