Posted: August 26th, 2016

Which was the new company request?

Long Beach Pharmaceutical Company has two divisions, which reported the following results for the most recent year.
Division I Division II
Income $ 900,000 $ 200,000
Average invested capital $ 6,000,000 $ 1,000,000
ROI 15 % 20 %
Required:
1. Compute each division’s residual income for the year under each of the following assumptions about the firm’s cost of acquiring capital. (Negative amounts should be indicated by a minus sign. Leave no cells blank – be certain to enter “0” wherever required. Omit the “$” sign in your response.)
Division I Division II
Residual income at 12% $ $
Residual income at 15% $ $
Residual income at 18% $ $
Inputed interest rate is 14%