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Coolbrook Company has the following information available for the past year:
| | River Division | Stream Division |
| Sales revenue | $1,200,000 | $1,800,000 |
| Cost of goods sold and operating expense | 900,000 | 1,300,000 |
| Net operating income | $ 300,000 | $ 500,000 |
| Average investment assets | $1,200,000 | $1,800,000 |
1. Calculate return on investment (ROI) and residual income for each division for last year.
2. Recalculate ROI and residual income for each division for each independent and each situation that follows:
a. Operating income increases by 10%.
b. Operation income decreases by 10%.
c. The company invests $250,000 in each division, an amount that generates $100,000 additional income per
division.
d. Coolbrook changes its hurdle rate to 10%.
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