You must prepare a return on investment analysis for the regional manager of Out-and-In Burgers. This growing chain is trying to decide which outlet of two alternatives to open. The first location (A) requires a $500,000 investment and is expected to yield annual net income of $70,000. The second location (B) requires a $200,000 investment and is expected to yield annual net income of $38,000.
Compute the return on investment for each Out-and-In Burgers alternative. (Omit the “%” sign in your response.)
Location Return onInvestment
Location A %
Location B %
Comart, a retailer of consumer goods, provides the following information on two of its departments (each considered an investment center).
Investment Center Sales Net
Electronics $ 11,100,000 $ 688,500 $ 4,050,000
Sporting goods 7,900,000 880,000 5,500,000
Compute return on investment for each department. (Do not round your intermediate calculations and round your final answers to the nearest whole percentages. Omit the “%” sign in your response.)
Return on Investment
Sporting goods %
Using return on investment, which department is most efficient at using assets to generate returns for the company?
Assume a target income level of 12.7% of average invested assets. Compute residual income for each department. (Omit the “$” sign in your response.)
Electronics Sporting goods
Residual income $ $
(2.2) Which department generated the most residual income for the company?
(3) Assume that the Electronics department is presented with a new investment opportunity that will yield a 14.8% return on assets. (Assume a target income level of 12.7% of average invested assets.) Should the new investment opportunity be accepted?
Lâ€™Oreal reports the following for a recent year for the major divisions in its Cosmetics branch.
(â‚¬ millions) Sales Income Total Assets
End of Year
Beginning of Year
Professional products â‚¬ 2,572 â‚¬ 509 â‚¬ 2,316 â‚¬ 2,240
Consumer products 8,375 1,558 5,296 5,161
Luxury products 4,190 746 3,859 2,495
Active cosmetics 1,309 269 617 618
Total â‚¬ 16,446 â‚¬ 3,082 â‚¬ 12,088 â‚¬ 10,514
1.1 Compute profit margin for each division. (Round your answers to 2 decimal places. Omit the “%” sign in your response.)
Investment Center Profit margin
Professional products %
Consumer products %
Luxury products %
Active cosmetics %
1.2Which Lâ€™Oreal division has the highest profit margin?
2.1 Compute investment turnover for each division. (Do not round intermediate calculations and round your final answers to 2 decimal places.)
Investment Center Investment turnover
2.2Which Lâ€™Oreal division has the best investment turnover?