## [solution]: Hi! Can you help us answer our final project for accounting? We

More Details:

Hi! Can you help us answer our final project for accounting? We can't understand what our professor is teaching so we don't know what to do. Please show your solution if needed. Thank you! ;)

Mowen, Hansen, &amp; Heitger

Cornerstone of Managerial Accounting, 5th edition (with modifications)

The manager of a division that produces add-on products for the automobile industry has just been

presented the opportunity to invest in two independent projects. The first is an air conditioner for the

back seats of vans and minivans. The second is a turbocharger. Without the investments, the division

will have average assets for the coming year of P28.9 million and expected operating income of P4.335

million. The outlay required for each investment and the expected operating income are as follows:

Outlay

Operating Income

Air Conditioner

Turbocharger

P750,000

P540,000

90,000

82,080

(Note: Round all numbers to two decimal places.)

Required:

1. Compute the ROI for each investment project.

2. Compute the budgeted divisional ROI for each of the following four alternatives:

a. The air conditioner investment is made.

b. The turbocharger investment is made.

3. Assuming that divisional managers are evaluated and rewarded on the basis of ROI

performance, which alternative do you think the divisional manager will choose?

4. Suppose the company sets a minimum required rate of return equal to 14%. Calculate the

residual for each of the following four alternatives:

a. The air conditioner investment is made.

b. The turbocharger investment is made.

Which option will the manager choose based on residual income? Explain.

5. Suppose that the company sets a minimum required rate of return to 10%. Calculate the

residua income for each of the following four alternatives:

a. The air conditioner investment is made.

b. The turbocharger investment is made.

Based on residual income, are the investments profitable? Why does answer differ from your

Page 1

Solution details:
STATUS
QUALITY
Approved

This question was answered on: Dec 18, 2020

Solution~00031148133935.zip (25.37 KB)

This attachment is locked

We have a ready expert answer for this paper which you can use for in-depth understanding, research editing or paraphrasing. You can buy it or order for a fresh, original and plagiarism-free copy (Deadline assured. Flexible pricing. TurnItIn Report provided)

STATUS

QUALITY

Approved

Dec 18, 2020

EXPERT

Tutor