Sun Oil has three regions. Each region’s required rate of return is 40 percent. Planned operating results for 2023…

Sun Oil has three regions. Each region’s required rate of return is 40 percent. Planned operating results for 2023…

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Sun Oil has three regions. Each region’s required rate of return is 40 percent. Planned operating results for 2023…
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Sun Oil has three regions. Each region’s required rate of return is 40 percent. Planned operating results for 2023
are:
Division
North America
Europe
Asia
Paragraph V
The company is planning an expansion requiring each region to increase its investments by $8,000,000 resulting
in income of $2,800,000 and revenues of $5,600,000.
Required:
Investment
$70,000,000
$9,000,000
$1,600,000
North America
Europe
Asia
Revenues Operating Income
16,800,000 $4,200,000
14,400,000 $3,240,000
4,000,000 $800,000
B I U A
+ v
A. Compute the current Return on Sales, Investment Turnover, ROI for each region (9 marks)
B. Compute the residual income for each region(3 marks)
***
3 C. Compute residual income and ROI for the expansion. (4 marks)
Residual income
ROI
D. Which region(s) would be pleased with the expansion assuming managers are evaluated on a
ROI? Why? (2 marks) E. Which region(s) would be pleased with the expansion assuming mangers are evaluated on RI?
Why? (2 marks)
I
F. Companies may use net book value of fixed assets as a means for measuring assets. In your
own words explain net book value of fixed assets. (2 marks) Sun Oil has three regions. Each region’s required rate of return is 40 percent. Planned operating results for 2023
are:
Division
North America
Europe
Asia
Paragraph V
The company is planning an expansion requiring each region to increase its investments by $8,000,000 resulting
in income of $2,800,000 and revenues of $5,600,000.
Required:
Investment
$70,000,000
$9,000,000
$1,600,000
North America
Europe
Asia
Revenues Operating Income
16,800,000 $4,200,000
14,400,000 $3,240,000
4,000,000 $800,000
B I U A
+ v
A. Compute the current Return on Sales, Investment Turnover, ROI for each region (9 marks)
B. Compute the residual income for each region(3 marks)
***
3 C. Compute residual income and ROI for the expansion. (4 marks)
Residual income
ROI
D. Which region(s) would be pleased with the expansion assuming managers are evaluated on a
ROI? Why? (2 marks) E. Which region(s) would be pleased with the expansion assuming mangers are evaluated on RI?
Why? (2 marks)
I
F. Companies may use net book value of fixed assets as a means for measuring assets. In your
own words explain net book value of fixed assets. (2 marks) Sun Oil has three regions. Each region’s required rate of return is 40 percent. Planned operating results for 2023
are:
Division
North America
Europe
Asia
Paragraph V
The company is planning an expansion requiring each region to increase its investments by $8,000,000 resulting
in income of $2,800,000 and revenues of $5,600,000.
Required:
Investment
$70,000,000
$9,000,000
$1,600,000
North America
Europe
Asia
Revenues Operating Income
16,800,000 $4,200,000
14,400,000 $3,240,000
4,000,000 $800,000
B I U A
+ v
A. Compute the current Return on Sales, Investment Turnover, ROI for each region (9 marks)
B. Compute the residual income for each region(3 marks)
***
3 C. Compute residual income and ROI for the expansion. (4 marks)
Residual income
ROI
D. Which region(s) would be pleased with the expansion assuming managers are evaluated on a
ROI? Why? (2 marks) E. Which region(s) would be pleased with the expansion assuming mangers are evaluated on RI?
Why? (2 marks)
I
F. Companies may use net book value of fixed assets as a means for measuring assets. In your
own words explain net book value of fixed assets. (2 marks)

Expert Answer:

Answer rating: 100% (QA)

SOLUTION A To compute the current return on sales investment turnover and ROI for each region we can use the following formulas Return on Sales Operat
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