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Coolbrook Company has the following information available for the past year: ...

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Accounting

Coolbrook Company has the following information available for the past year:

River Division Stream Division
Sales revenue $ 1,214,000 $ 1,814,000
Cost of goods sold and operating expenses 897,000 1,286,000
Net operating income $ 317,000 $ 528,000
Average invested assets $ 1,150,000 $ 1,580,000

The companys hurdle rate is 7.26 percent.

Required:

1. Calculate return on investment (ROI) and residual income for each division for last year.

2. Recalculate ROI and residual income for the division for each independent situation that follows:

a. Operating income increases by 10 percent.

b. Operating income decreases by 12 percent.

c. The company invests $250,000 in each division, an amount that generates $115,000 additional income per division.

d. Coolbrook changes its hurdle rate to 5.26 percent.

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