The Clipper Corporation Had Net Operating Income of $380,000 and Average

Essay

The Clipper Corporation had net operating income of $380,000 and average operating assets of $2,000,000.The corporation requires a return on investment of 18%.
Required:
a.Calculate the company's return on investment (ROI)and residual income (RI).
b.Clipper Corporation is considering an investment of $70,000 in a project that will generate annual net operating income of $12,950.Would it be in the best interests of the company to make this investment?
c.Clipper Corporation is considering an investment of $70,000 in a project that will generate annual net operating income of $12,950.If the division planning to make the investment currently has a return on investment of 20% and its manager is evaluated based on the division's ROI,will the division manager be inclined to request funds to make this investment?
d.Clipper Corporation is considering an investment of $70,000 in a project that will generate annual net operating income of $12,950.If the division planning to make the investment currently has a residual income of $50,000 and its manager is evaluated based on the division's residual income,will the division manager be inclined to request funds to make this investment?