Return on Investment and Residual Income The Emergency Medical Services Company has two divisions that...
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Accounting
Return on Investment and Residual Income The Emergency Medical Services Company has two divisions that operate independently of one another. The financial data for the year 20X5 reported the following results:
North
South
Sales
$3,480,000
$2,980,000
Operating income
870,000
670,000
Taxable income
740,000
465,000
Investment
6,000,000
5,000,000
The company's desired rate of return is 10%. Income is defined as operating income.
a. What are the respective return-on-investment ratios for the North and South divisions?
Round ROI to the nearest whole percentage.
ROI
North
Answer%
South
Answer%
b. What are the respective residual incomes of the North and South divisions?
Residual Income
North
$Answer
South
$Answer
c. Which division has the better return on investment and which division has the better residual income figure?
Return on investment
AnswerNorthSouth
Residual income
AnswerNorthSouth
Answer & Explanation
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