The Augment Manufacturing Company Has Three Divisions: X Division,Y Division,and

question 137

Essay

The Augment Manufacturing Company has three divisions: X Division,Y Division,and Z Division.Operating results for the three divisions for last year were as follows: $$\begin{array} { | l | r | r | r | } \hline & \operatorname { Di } \times & \operatorname { Di } Y & \operatorname { Di } Z \\\hline \text { Residual income } & \$ 98,400 & \$ 27,200 & \$ 12,000 \\\hline \text { Net operating income } & 188,600 & 115,600 & 76,000 \\\hline \begin{array} { l } \text { Average operating } \\\text { assets }\end{array} & 820,000 & 680,000 & 400,000 \\\hline \text { Sales } & 1,640,000 & 1,445,000 & 1,040,000 \\\hline \text { Profit margin } & 11.5 \% & 8.0 \% & 5.0 \% \\\hline\end{array}$$
Required:
a.What is the ROI for each of the three divisions?
b.What is the cost of capital for each of the three divisions?

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Definitions:

Population Parameter

A numeric value that describes a characteristic of the entire population, such as the mean or standard deviation.

Unbiased Estimator

A statistical estimator that, on average, produces values equal to the parameter being estimated.

Population Parameter

A characteristic or measure that describes an aspect of an entire population, such as mean or standard deviation.

Sampling Distribution

A distribution showing the chances of different outcomes for a statistic, which is generated from a significant amount of samples from a certain population.