Bleu Stone Is a Division of a Major Corporation Required:
A

question 8

Essay

Bleu Stone is a division of a major corporation. The following data are for the latest year of operations:
$\begin{array}{l}\text { Sales } & \$ 33,040,000 \\\text { Net operating income } & \$ 1,453,760 \\\text { Average operating assets } & \$ 8,000,000\\\text { The company's minimum required rate of return }&18\%\end{array}$


Required:
a. What is the division's return on investment (ROI)?
b. What is the division's residual income?

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Definitions:

Priority Claims

Debts that are given special status and are paid before other debts in a bankruptcy proceeding.

Subordination Agreements

Legal documents that alter the priority of financial claims, making one party's claim rank behind another's in the event of a bankruptcy or liquidation.

Pro Rata

A Latin term that means "in proportion," often used to describe a method of allocating amounts or shares among participants according to their entitlement or contribution.

Chapter 11

A provision under the U.S. Bankruptcy Code that allows businesses to reorganize and restructure their debts while continuing operations.