Answer: 1020
Explanation:
The following information can be gotten from the question:
Face value of bond = 1000
Coupon = 8%
Therefore, PMT = 8% × 1000/2 = 40
Years to maturity = 19
Since semiannual payments are made,
Nper = 19 × 2 = 38
Current price = PV
= 102% × 1000
= 1.02 × 1000
= 1020
1. Current Yield = Coupon/Current prce
= (2*40)/1020 = 7.84%
CHAPTER 3: Frank is a friend of yours and works with you at the same company. He is a well-respected and trusted employee. He has two young children and is a leader in his community. You have discovered that Frank has embezzled $3,000 over a period of several years. While this is not much money for such a large company, you suspect that if you don’t report him, the problem may get worse. On the other hand, he has young children, and he has done so much good in the company and the community. If you report him, he may go to prison because your company has an aggressive fraud prosecution policy. Should you report him or are there any other alternatives ways to deal with this problem available to you?
Answer:
Alternative Ways! (Maybe?)
Explanation:
Depending on the relationship your character has with this Frank, you could pick an alternative way, which would be talking with Frank and discussing why he smuggled the $3,000. If you were to talk to him and convince him to stop stealing this money, he wouldn't get in trouble but hopefully, he would stop stealing from the company.
Hope that helps!
Suppose that Ava withdraws $300 from her savings account at Second Bank. The reserve requirement facing Second Bank is 10%. Assume the bank does not wish to hold any excess reserves of new deposits. Use this information to complete the balance sheet below to show how Second Bank's assets and liabilities change when Ava withdraws the $300 from the bank. Instructions: Enter your answer as a whole number. If you are entering a negative number include a minus sign. A Simple Bank Balance Sheet Assets Liabilities Change in Reserves: $ Change in Deposits: $ Change in Loans: $
Answer:
As a result of withdrawal of $300 from the saving account. The decrease in the required reserve = 300 * 10% = $30. So, Change in reserve = -$30.
Decrease in loans (since there is no excess reserve) = $300 - $30 = $270
So, change in loans = -$270
Decrease in deposits = $300 (Because it is withdrawn). So, change in deposit = -$300
Balance Sheet
Assets Liabilities
Change in required reserve = -$30 | Change in deposit = -$300
Change in loan = -$270
Total Change -$300 -$300
air transportation results in lower inventory holding costs.” True or false?
Answer:
I think its false
State the meaning of managerial economics, its characteristics, and the contribution of economic theory for Managerial Economics?
Answer:
Explanation:
Managerial Economics like its name suggests, is a culmination of both economics theory and managerial theory. It deals with the applying of some economic theories, tools, and or even methodologies in order to solve practical problems in a business. A lot of the times, these business decisions do not only affect daily decisions, it also extends to, and affects the economic power. Some characteristics include it being;
Pragmatic.
It also makes use of the theory of firm.
It uses the help of macroeconomics.
Aiming to render any form of help to the management.
And lastly, it is also a scientific art.
In the 2-factor, 2 good Heckscher-Ohlin model, the two countries differ in:________
a. tastes and preferences.
b. military capabilities.
c. the size of their economies.
d. relative abundance of factors of production.
e. labor productivities.
Answer:
d. relative abundance of factors of production
Explanation:
The Heckscher-Ohlin model is also known as the 2x2x2 model or H-O model. This model is used to assess the trade or mainly the equilibrium of a trade that is between two countries having different natural resources and different specialties.
The 2-factor, 2 good Heckscher-Ohlin model is used for the two countries which differs in the relative abundance of factors of production.
Polk Company manufactures basketballs. Materials are added at the beginning of the production process and conversion costs are incurred uniformly. Production and cost data for the month of July 2016 are as follows. Production Data - Basketballs Units Percentage Complete Work in process units, July 1 500 60% Units started into production 1,000 Work in process units, July 31 600 40% Cost Data - Basketballs Work in process, July 1 Materials $750 Conversion Costs 600 $1,350 Direct materials 2,400 Direct labor 1,580 Manufacturing overhead 1,240 Instructions: Calculate the following The equivalent units of production for materials and conversion costs. The units costs of production for materials and conversion costs. The assignment of costs to units transferred out and in process at the end of the accounting period. Prepare a production cost report for the month of July for the basketballs
Answer and Explanation:
The computation is shown below:
a.
1. Calculation of the equivalent units
Particulars Physical units % Material % Conversion cost
Units transferred
out 900 100% 900 100% 900
Ending
work in process 600 100% 600 40% 240
Equivalent
units 1,500 1,140
2. Cost per equivalent unit is
Particulars Material Conversion cost
Beginning
inventory $750 $600
Cost during
period $2,400 $2,820
Total cost $3,150 $3,420
Divided by
Equivalent
units $1,500 $1,140
Cost per
equivalent unit $2.1 $3
3. Transferred out cost is
= (3 + 2.1) × 900
= $4,590
And, the ending work in process cost is
= (600 ×$2.1) + (240 × $3)
= $1,960
2. Now the preparation of the production report is presented below:
Beginning work in process $1,350
Cost during period $5,220
Total cost accounted for $6,570
Transferred out cost $4,590
Ending work in process $1,960
Total cost accounted as $6,570
One hundred identical mortgages are pooled together into a pass-through security. Each mortgage has a $150,000 principal, a fixed annual interest rate of 8 percent (paid monthly), and is fully amortized over a term of 30 years. What is the monthly payment on the mortgage pass-through
Answer:
The monthly payment on the mortgage pass-through is $110,064.69.
Explanation:
The monthly payment on the mortgage pass-through can be calculated using the formula for calculating the present value of an ordinary annuity as follows:
PV = M * ((1 - (1 / (1 + r))^n) / r) …………………………………. (1)
Where;
PV = Present value or principal of the pass-through = 100 * $150,000 = $15,000,000
P = Monthly payment on the mortgage pass-through = ?
r = monthly interest rate = fixed annual interest rate / 12 = 8% / 12 = 0.08 / 12 = 0.00666666666666667
n = number of months = 30 years * 12 months = 360
Substitute the values into equation (1) and solve for M, we have:
$15,000,000 = M * ((1 - (1 / (1 + 0.00666666666666667))^360) / 0.00666666666666667)
$15,000,000 = M * 136.283494133963
M = $15,000,000 / 136.283494133963
M = $110,064.69
Therefore, the monthly payment on the mortgage pass-through is $110,064.69.
Commercial banks create money throughmaking loans. facilitating borrowing from the Federal Reserve to the public. printing treasury notes. reducing risk in the economy.
Answer:
making loans
Explanation:
Commercial bank is the bank where the most of the people do their banking. Here the money is to be provided and the interest is also earned from such loans like mortgage, auto loans, business loans, personal loans, etc
Therefore as per the given situation, the commercial bank would earned by the money by providing the loans or making the loans
Hence, the first option is correct
The market price of ABC stock has been very volatile and you think this volatility will continue for several weeks. Thus, you decide to purchase one two-month call option contract on ABC stock with a strike price of $25 and an option price of $1.30. You also purchase one two-month put option on ABC stock with a strike price of $25 and an option price of $.50. What will be your total profit on these positions if the stock price is $25.60 on the day the options expire
Answer:
-$120
Explanation:
Calculation for What will be your total profit on these positions if the stock price is $25.60 on the day the options expire
Total profit = [1 × 100 × (-$1.30 - 25 + 25.60)] + [1 × 100 × (-$.50)]
Total profit = [1 × 100 × (-$0.70)] + [1 × 100 × (-$.50)]
Total profit =(-$70)+(-$50)
Total profit = -$120
Therefore What will be your total profit on these positions if the stock price is $25.60 on the day the options expire is -$120
I just wanna know how do you know the percentage please help,,,,,Marble Company purchased a machine costing $137,000, terms 3/10, n/30. The machine was shipped FOB shipping point and freight charges were $3,700. The machine requires special mounting and wiring connections costing $11,700. When installing the machine, $3,000 in damages occurred. Materials costing $3,200 are used in testing and adjusting the machine to produce a satisfactory product. Compute the cost recorded for this machine assuming Marble paid within the discount period. I just want to know how do you know the percentage no one explains!! Thank you
Answer:
$150,253.00
Explanation:
The cost to be recorded will include all the direct cost of installing the machine less the discount allowed.
The total cost of the machine will be
cost price $137,000
Freight charges $3,700
mounting & wires $11,000
testing materials $3,200
Total cost $154,900
The machine was paid with the discount period. The tern3/10, n 30 means that the buyer will get a 3% discount if they pay with ten days of the invoice date. Full payment is expected within 30 days if the buyer does not pay within ten days.
the discount amount will be 3% of $154,900
=3/100 x $154,900
=0.03 x $154,900
=$4,647.00
the amount recorded will be
=$154,900.00 - $4,647.00
= $150,253.00
When a bottleneck occurs in a process used in the production of multiple products, the company must determine the contribution margin for each product and give priority to the product that has the lowest contribution margin per bottleneck hour.
a. True
b. False
Answer:
b. False
Explanation:
In project management or in production processes, a bottle neck is a process where the limited capacity of the process reduces its capacity of the whole chain process. The results of having bottleneck in a process are supply overstock, stalls in production, pressure from customers, etc.
When bottleneck occurs in the process used in production of multiple products, the company should determine contribution margin for each of the product and then priority should be given to that product that contributes to the maximum contribution margin per bottleneck hour.
Financial intermediaries are A. the same as financial markets. B. individuals who make profits by buying a stock low and selling it high. C. a more general name for financial assets such as stocks, bonds, and checking accounts. D. financial institutions through which savers can indirectly provide funds to borrowers.
Answer:
D. financial institutions through which savers can indirectly provide funds to borrowers.
Explanation:
Financial intermediaries are financial institutions through which savers can indirectly provide funds to borrowers.
Some examples of financial intermediaries include banks, unit trust firms, building societies etc.
This ultimately implies that, they are the middle men the lenders and borrowers in a financial transaction.
City Street Fund has a portfolio of $450 million and liabilities of $10 million. a. If there are 44 million shares outstanding, what is the net asset value
Answer:
10
Explanation:
City street fund has a portfolio value of $450 million
Liabilities is $10 million
Outstanding shares is 44 million
Therefore the net asset value can be calculated as follows
Portfolio value-liabilities/no of shares outstanding
= 450 million-10million/44 million
= 440 million/44 million
= 10
Hence the net asset value is 10
The date on which a cash dividend becomes a binding legal obligation is on the declaration date. last day of the fiscal year-end. date of record. payment date.
Answer:
A. the declaration date.
Explanation:
The date on which a cash dividend becomes a binding legal obligation is on the declaration date.
meaning of hazard in risk management and examples
Answer: Identifying Hazards Means Identifying Sources of Risks
Explanation:
A hazard is basiclly something that could harm something else or someone.
So it’s basically now adverse affect
example; to people as health effects, to organizations as property or equipment losses, or to the environment).
I really hope this will help I’m sorry if I didn’t say what you wanted but there you go. (:
There may be a maximum balance requirement for a savings account.
True
False
Answer:
true
Explanation:
For example, if a bank account has a $100 minimum balance requirement, you want to make sure that you don't let your balance fall to $99.99 or less.
Assume that you are an intern with the Brayton Company, and you have collected the following data: The yield on the company's outstanding bonds is 7.75%; its tax rate is 40% and bond flotation cost is immaterial. The expected dividend on the company's common stock to be paid one year form today is $0.65 a share; the dividend is expected to grow at a constant rate of 6.00% a year; the price of the stock is $15.00 per share; the flotation cost for selling new shares is F
Answer: 8.04%
Explanation:
First find the after-tax cost of debt;
= 7.75% * ( 1 - 40%)
= 4.65%
Then Expected return on equity;
= (Next dividend / (Price * (1 - F)) ) + g
= (0.65 / (15 * (1 - 10%)) ) + 6%
= 10.81%
WACC = (Weight of debt * cost of debt) + (weight of equity * cost of equity or expected return)
= (0.45 * 4.65%) + (0.55 * 10.81%)
= 8.04%
The Burdell Wheel and Tire Company assembles tires to wheel rims for use on cars during manufacture of vehicles by the automotive industry. Burdell wants to locate a low-cost supplier for the tires he uses in his assembly operation. The supplier will be selected based on total annual cost to supply Burdell's needs. Burdell's annual requirements are for 25,000 tires, and the company operates 250 days a year. The following data are available for two suppliers being considered.SUPPLIER SHIPPING QUANTITY PER SHIPMENT SHIPPING COSTS PRICE / TIRE (p) INVENTORY HOLD COSTS (H) LEAD TIME (DAYS) ADMIN. COSTSLEXINGTON TIRE2,000 $18,000 $30 $6.00 6 $15,000IRMO AUTO1,000 $25,000 $29 $5.80 4 $18,000Using the Total Cost Analysis for Supplier Selection, which supplier should Burdell choose? Provide details to justify your answer.
Answer:
LEXINGTON TIRE provides a higher unit cost but, a lower inventory cost overall considering the ordering, holding cost, and administrative cost generated.
The company should pick LEXINGTON TIRE
Explanation:
LEXINGTON TIRE
SHIPPING QUANTITY PER SHIPMENT 2,000
SHIPPING COSTS 18,000
PRICE per TIRE 30
INVENTORY HOLD COSTS (H) 6.00
LEAD TIME (DAYS) 6
ADMIN. COSTS 15,000
Total cost: 25,000 / 2,000 = 12.5 per year
shipment cost: $18,000 per shipment x 12.5 per year = 225,000
Materials cost:
25,000 tires x $30 per tire = 750,000
Holding cost:
lead time + average inventory
6 days x 100 tires + 2,000 tires / 2 = 1,600 tires on average
times $6 holding cost = 9,600
Total cost: Inventory 225,000 + 750,000 materials + 9,600 holding + 15,000 admin
total 999,600
IRMO AUTO
SHIPPING QUANTITY PER SHIPMENT 1,000
SHIPPING COSTS 25,000
PRICE per TIRE 29(p)
INVENTORY HOLD COSTS (H) 5.80
LEAD TIME (DAYS) 4
ADMIN. COSTS 18,000
Shipping per year: 25,000 / 1,000 = 25
Ordering cost: 25 shipment x 25,000 = 625,000
Materials:
25,000 x 29 = 725,000
Holding:
lead time + average inventory
4 days x 100 + 1000/2 = 900 units on inventory throughout the year
Holding cost: 900 x $5.80 = 5,220
Total Inventory cost:
Ordering 625,000 + materials 725,000 + 5,220 holding + 18,000 admin
total = 1,355,220
Firms usually offer their customers some form of trade credit. This allowance comes with certain terms of credit, which will affect the actual cost of asset being sold for the buyer and the seller.Consider this case:Purple Turtle Group buys most of its raw materials from a single supplier. This supplier sells to Purple Turtle on terms of 4/10, net 60. The cost per period of the trade credit extended to Purple Turtle, rounded to two decimal places, is:______
Answer:
Purple Turtle Group
The cost per period of the trade credit extended to Purple Turtle, rounded to two decimal places, is:______
30%
Explanation:
a) Data and Calculations:
Credit terms = 4/10, net 60
The credit terms imply that the customer allows Purple Turtle Group 4% if it pays within 10 days, and the maximum period of the credit is 60 days.
Computing the difference between discount period and credit period = 60 - 10 = 50 days
Dividing number of days in a year by the above difference = 360/50 = 7.2
7.2 will be used to annualized the discount rate below.
Computing the difference between discount rate and 100% = 96%
Therefore, interest rate offered to customers = 4%/96% = 0.0417
The effective interest rate = 7.2 * 0.0417 = 0.30 = 30%
On July 15, 2021, Ortiz & Co. signed a contract to provide EverFresh Bakery with an ingredient-weighing system for a price of $87,600. The system included finely tuned scales that fit into EverFresh’s automated assembly line, Ortiz’s proprietary software modified to allow the weighing system to function in EverFresh’s automated system, and a one-year contract to calibrate the equipment and software on an as-needed basis. (Ortiz competes with other vendors who offer ongoing calibration contracts for Ortiz’s systems.) If Ortiz was to provide these goods or services separately, it would charge $58,000 for the scales, $10,000 for the software, and $32,000 for the calibration contract. Ortiz delivered and installed the equipment and software on August 1, 2021, and the calibration service commenced on that date. Assume that the scales, software and calibration service are all separate performance obligations. How much revenue will Ortiz recognize in 2021 for this contract?
Answer:
Ortiz & Co.
Ortiz & Co will recognize $71,341 revenue in 2021 for this contract.
Explanation:
a) Data and Calculations:
Contract price = $87,600
Separate performance contracts:
Scale Software Calibration Total
Separate $58,000 $10,000 $32,000 $100,000
Percentage 58% 10% 32%
Contract $50,808 $8,760 $28,032 $87,600
2021 revenue
recognition 100% 100% 5/12 (42%)
Recognized
revenue $50,808 $8,760 $11,773 $71,341
2022 revenue 0 0 $16,259
b) The revenue for the calibration of the equipment and software will not be fully recognized in 2021 because it is a one-year contract. Since the calibration commenced on August 1, 2021, only revenue for 5/12 months or 42% (amounting to $11,773) will be recognized in 2021. The remaining 58% or 7/12 months' revenue of $16,259 will be recognized in 2022.
In the Sheffield Corp., indirect labor is budgeted for $108000 and factory supervision is budgeted for $36000 at normal capacity of 160000 direct labor hours. If 180000 direct labor hours are worked, flexible budget total for these costs is:_______
a. $157500.
b. $144000.
c. $162000.
d. $148500.
Answer:
Total flexible cost= $157,500
Explanation:
Factory supervisor is a fixed cost.
First, we need to calculate the unitary variable cost:
Unitary variable cost= 108,000/160,000= $0.675
Now, the total flexible cost for 180,000 hours:
Total flexible cost= 0.675*180,000 + 36,000
Total flexible cost= $157,500
Your firm has net income of $371 on total sales of $1,460. Costs are $800 and depreciation is $130. The tax rate is 30 percent. The firm does not have interest expenses. What is the operating cash flow
Answer:
Operating cash flow = $501
Explanation:
Given:
Total sales = $1,460
Total cost = $800
Depreciation = $130
Tax rate = 30% = 0.30
Find:
Operating cash flow
Computation:
Earning Before Interest and Tax = $1,460 - $800 - $130
Earning Before Interest and Tax = $530
Tax = Tax rate x $530
Tax = 0.30 x $530
Tax =$159
Operating cash flow = $530 + $130 - $159
Operating cash flow = $501
A leader who tries to connect with their workers by understanding their wants and needs is practicing ______.
a.
Courage
b.
Dependability
c.
Empathy
d.
Vision
Answer:
C
Explanation:
According to arnold and bustos, which two sectors of the US economy are the mot carbon-intensive?
Answer: Transportation and electricity generation
Explanation:
According to Arnold and Bustos, the two sectors of the United States economy that are the most carbon-intensive are the transportation sector and the electricity generation sector.
The transportation sector contributes a lot to the emissions of greenhouse gas emissions as they typically come when fossil fuel for ships, vans, planes, motorcycles, cars etc are burned. Also, the generation of electricity is also carbon intensive as carbon is being powered in order to generate electricity.
The 2019 Form 10-K of Oracle Corporation, for the May 31, 2019 year-end, included the following information relating to their allowance for doubtful accounts: Balance in allowance at the beginning of the year $370 million, accounts written off during the year of $188 million, balance in allowance at the end of the year $371 million. What did Oracle Corporation report as bad debt expense for the year
Answer: $189
Explanation:
The amount that Oracle Corporation report as bad debt expense for the year will be calculated as:
Balance in allowance at the end of the year = $371
Add: Accounts written off during the year = $188
Less: Balance in allowance at the beginning of the year = ($370)
Bad debt = $189
The management of Dakota Corporation is considering the purchase of a new machine costing $420,000. The company's desired rate of return is 10%. The present value factors for $1 at compound interest of 10% for 1 through 5 years are 0.909, 0.826, 0.751, 0.683, and 0.621, respectively. In addition to the foregoing information, use the following data in determining the acceptability of this investment: YearIncome from OperationsNet Cash Flow 1$100,000 $180,000 240,000 120,000 320,000 100,000 410,000 90,000 510,000 90,000 The present value index for this investment is a.1.14 b.1.45 c.0.70 d.1.08
Answer:
d. 1.08
Explanation:
The computation of the present value index is as follows
The Present value Index is
= Total Present Value of Net cash Inflows ÷ Investment
= $455,200 ÷ $420,000
= 1.08
The total present value would be
Year Net Cash Flow Present Value factor Present Value
1 $1,80,000 0.909 $1,63,620
2 $1,20,000 0.826 $99,120
3 $1,00,000 0.751 $75,100
4 $90,000 0.683 $61,470
5 $90,000 0.621 $55,890
Total Present Value of Net cash Inflows $4,55,200
During 2022, Pharoah Company reported cash provided by operations of $985000, cash used in investing of $851000, and cash used in financing of $236000. In addition, cash spent on fixed assets during the period was $342000. Average current liabilities were $806000 and average total liabilities were $2128000. No dividends were paid. Based on this information, what was Pharoah free cash flow
Answer:
$643,000
Explanation:
Calculation for Pharoah free cash flow
Using this formula
Free Cash flow =Cash provided by operations -Cash spent on fixed assets
Let plug in the formula
Free cash flow=$985000-$342000
Free cash flow=$643,000
Therefore Pharoah free cash flow will be $643,000
Information for the Deuce Manufacturing Company follows. Compute the cost of goods manufactured for this company. Beginning raw materials inventory $ 53,200 Beginning work in process, inventory 78,400 Ending raw materials inventory 58,100 Ending work in process, inventory 98,000 Direct labor 149,800 Total factory overhead 105,000 Raw material purchases 210,000
Answer:
cost of goods manufactured= $440,300
Explanation:
First, we need to determine the direct material used in production:
Direct material used= beginning inventory + purchases - ending inventory
Direct material used= 53,200 + 210,000 - 58,100
Direct material used= $205,100
To calculate the cost of goods manufactured, we need to use the following formula:
cost of goods manufactured= beginning WIP + direct materials + direct labor + allocated manufacturing overhead - Ending WIP
cost of goods manufactured= 78,400 + 205,100 + 149,800 + 105,000 - 98,000
cost of goods manufactured= $440,300
While ________ are things a firm has to work with, such as equipment, facilities, raw materials, employees, and cash, _____ are things a firm can do, such as deliver good customer service or develop innovative products to create value.
Answer:
resources; capabilities.
Explanation:
While resources are things a firm has to work with, such as equipment, facilities, raw materials, employees, and cash, capabilities are things a firm can do, such as deliver good customer service or develop innovative products to create value.
Generally, in order to be able to manufacture goods or provide services that meet the needs of various customers (end users), all companies or industries have to make use of resources. These resources are either sourced for on a regular basis or gotten at the inception of the business.
Also, the capabilities of a business firm or company is its ability to provide finished goods and services that meet the requirements or needs of the end users (consumers), as well as effectively solve unique problems in the world.
The vice president of operations of Free Ride Bike Company is evaluating the performance of two divisions organized as investment centers.Invested assets and condensed income statement data for the past year for each division are as follows: Road bike division Mountain bike divisionSales $1,728,000 $1,760,000Cost of goods sold $1,380,000 $1,400,000Operating expenses $175,200 $236,800Invested assets $1,440,000 $800,0001) Prepare condensed divisional income statements for the year ended December 31, 2014, assuming that there were no service department charges.2) Using the DuPont formula for rate of return on investment, determine the profit margin, investment turnover, and rate of return on investment for each division.3) If management's minimum acceptable rate of return is 10%, determine the residual income for each division.4) Discuss the evaluation of the two divisions, using the performance measures determined in parts (1), (2), and (3).
Answer:
Free Ride Bike Company
1. Condensed Divisional Income Statements for the year ended December 31, 2014:
1. Road bike division Mountain bike division Total
Sales $1,728,000 $1,760,000 $3,488,000
Cost of goods sold $1,380,000 $1,400,000 $2,780,000
Operating expenses $175,200 $236,800 $412,000
Net Income $172,800 $123,200 $296,000
2. Du Pont ROI = Return on sales * Asset Turnover
Road bike division Mountain bike division
= 1.2 * 10% = 12% 2.2 * 7% = 15.4%
3. Residual income
Road bike division Mountain bike division Residual income $28,800 $43,200
4. Evaluation of the two divisions, using the performance measures determined in parts (1), (2), and (3):
The Road bike division outperformed the Mountain bike division when we evaluate their performances based on the Return on Sales or Net Income margin. However, using the DuPont formula on the return on investment and residual income parameters, one understands that the Mountain bike division outperformed the Road bike division. These show that performance evaluation should not be based on one measure. Using the different performance evaluation measures yield clearer pictures of divisional performance.
Explanation:
a) Data and Calculations:
Road bike division Mountain bike division Total
Sales $1,728,000 $1,760,000 $3,488,000
Cost of goods sold $1,380,000 $1,400,000 $2,780,000
Operating expenses $175,200 $236,800 $412,000
Net Income $172,800 $123,200 $296,000
Return on sales 10% 7% 8.5%
Invested assets $1,440,000 $800,000 $2,240,000
Asset Turnover 1.2($1,728,000/$1,440,00) 2.2($1,760,000/$800,000)
Du Pont ROI = Return on sales * Asset Turnover
= 1.2 * 10% = 12% 2.2 * 7% = 15.4%
b) Residual income
Road bike division Mountain bike division Total
Net Income $172,800 $123,200 $296,000
Minimum rate of return 10% 10% 10%
Dollar minimum return 144,000 $80,000 224,000
Residual income $28,800 $43,200 $72,000