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

question 110

Essay

Batman Abstract Company has three divisions that operate autonomously.Their results for 2015 are as follows:
$$\begin{array} { | l | r | r | r | } \hline & { \text { Riddler } } & { \text { Joker } } & { \text { Penguin } } \\\hline \text { Sales } & \$ 5,000,000 & \$ 7,000,000 & \$ 10,000,000 \\\hline \text { Contribution margin } & 1,440,000 & 1,700,000 & 3,500,000 \\\hline \text { Pperating income } & 1,000,000 & 1,750,000 & 2,520,000 \\\hline \text { Investment base } & 9,000,000 & 10,000,000 & 14,000,000 \\\hline\end{array}$$ The company's desired rate of return is 20%.
Required:
a.Compute each division's ROI.
b.Compute each division's residual income.
c.Rank each division by both ROI and residual income.
d.Which division had the best performance in 2015? Why?

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Definitions:

Human Capital

The skills, knowledge, and experience possessed by an individual or population, viewed in terms of their value or cost to an organization or country.

Waitress Earnings

The compensation, including wages and tips, received by a server in the hospitality or food service industry.

Profit-Maximizing

The process or strategy by which a firm adjusts its production to achieve the highest possible profit from its operations.

Interest Rate

The cost of borrowing money, expressed as a percentage of the total amount loaned, or the return on investment.