Red Earth Company Has Two Divisions, the Okla Division and the Homa

question 95

Essay

Red Earth Company has two divisions, the Okla Division and the Homa Division. Last year, the Okla Division earned $66,000 using average operating assets of $550,000. Last year, the Homa Division earned $260,000 using average operating assets of $2,000,000. Minimum required rate of return for Red Earth is 9%.
Now assume that the minimum required rate of return for Red Earth is 12%.

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Definitions:

Land

The solid surface of the Earth that is not covered by water, including the soil and geophysical features, which can be owned, bought, or sold.

Fee Simple Interest

Fee simple interest is the most complete form of ownership in real property, providing the owner absolute control under the law, barring any governmental restrictions or private limitations.

Right Of Way

Right Of Way is a legal right, granted by agreement or law, to pass through property owned by another party.

Prescription

The acquisition of rights or property, such as an easement, through the continuous and open use of the property over a period of time according to the laws of the jurisdiction.