O'Neil Company Requires a Return on Capital of 15 Per $\quad$

question 14

Essay

O'Neil Company requires a return on capital of 15 per cent. The following information is available for 2011: $\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\quad$$\text { Division } \mathrm{X} \quad\quad\quad\quad\quad\quad \text { Division } Y \quad\quad\quad\quad\quad \text { Division } \mathrm{Z}$
$\begin{array}{lrrrrrr}&\text { Book }& \text { Current } & \text { Book } &\text { Current }& \text { Book } &\text { Current }\\\hline\text { Sales } & £ 200,000 & £ 200,000 & £ 400,000 & £ 400,000 & £ 600,000 & £ 600,000 \\\text { Income } & 24,000 & 20,000 & 32,000 & 34,000 & 37,500 & 39,000 \\\text { Assets } & 120,000 & 160,000 & 180,000 & 200,000 & 450,000 & 435,000\end{array}$

A)Compute return on investment using both book and current values for each division. (Round answer to three decimal places.)
B)Compute residual income for both book and current values for each division.
C)Does book value or current value provide the better basis for performance evaluation?
D)Which division do you consider the most successful?

• A)Compute return on investment using both book and current values for each division. (Round answer to three decimal places.)
• B)Compute residual income for both book and current values for each division.
• C)Does book value or current value provide the better basis for performance evaluation?
• D)Which division do you consider the most successful?

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Definitions:

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