Megamart, a retailer of consumer goods, provides the following information on two of its departments...
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Accounting
Megamart, a retailer of consumer goods, provides the following information on two of its departments (each considered an investment center).
Investment Center
Sales
Income
Average Invested Assets
Electronics
$
42,000,000
$
3,360,000
$
16,800,000
Sporting goods
19,456,000
2,432,000
12,800,000
1. Compute return on investment for each department. Using return on investment, which department is most efficient at using assets to generate returns for the company? 2. Assume a target income level of 10% of average invested assets. Compute residual income for each department. Which department generated the most residual income for the company? 3. Assume the Electronics department is presented with a new investment opportunity that will yield a 14% return on investment. Should the new investment opportunity be accepted?
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