Batman Abstract Company Has Three Divisions That Operate Autonomously The Company's Desired Rate of Return Is 20

question 29

Essay

Batman Abstract Company has three divisions that operate autonomously.Their results for 2017 are as follows:
$$\begin{array} { | l | r | r | r | } \hline &{ \text { Riddler } } & { \text { Joker } } & { \text { Penguin } } \\\hline \text { Sales } & \$ 5000000 & \$ 7000000 & \$ 10000000 \\\hline \text { Contribution margin } & 1440000 & 1700000 & 3500000 \\\hline \text { Operating profit } & 1000000 & 1750000 & 2520000 \\\hline \text { Investment base } & 9000000 & 10000000 & 14000000 \\\hline\end{array}$$
The company's desired rate of return is 20%.
Required:
a.Calculate each division's ROI.
b.Calculate each division's residual income.
c.Rank each division by both ROI and residual income.
d.Which division had the best performance in 2017? Why?
_____________________________________________________________________________________________
_____________________________________________________________________________________________

---

Definitions:

Per Annum

An annual rate or measurement, often used in the context of interest rates or financial growth rates.

Compounds Interest

Interest calculated on the initial principal as well as the accumulated interest of previous periods of a deposit or loan.

APR Loans

The Annual Percentage Rate of a loan encompasses the yearly interest rate plus any additional fees, representing the actual cost of borrowing.

EAR

Effective Annual Rate; the actual interest rate an investor or borrower receives or pays after compounding interest is taken into account over a year.