Review Sheet Exam4 FALL20090

Review Sheet Exam4 FALL20090 - Exam 4 Review Sheet Fall,...

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Exam 4 – Review Sheet Fall, 2009 Use the following information for the next 3 questions: Last year, the Flavored Popcorn Division of Skaleap International had a return on investment of 18%. Residual income was a positive $15,000 because the minimum required rate of return was 15%. Flavored Popcorn expects similar operating results in the coming year. Listed below are three possibilities for new flavors in the coming year: Expected Required Annual Investment Controllable In Additional Flavor Margin Assets Chocolate $ 4,200 $21,000 Chipolte $10,800 $67,500 Jalapeno $17,500 $62,500 1. If the Flavored Popcorn Division is being evaluated on the basis of ROI, what will be its reaction (accept or reject) for each flavor? Chocolate Chipolte Jalapeno a. Accept Accept Accept b. Accept Reject Accept c. Accept Reject Reject d. Reject Reject Accept e. Reject Reject Reject 2. If the Flavored Popcorn Division is being evaluated on the basis of residual income, what will be its reaction (accept or reject) for each flavor? Chocolate Chipolte Jalapeno a. Accept Accept Accept b. Accept Reject Accept c. Accept Reject Reject d. Reject Reject Accept e. Reject Reject Reject 3. Assume that the ROI for the Flavored Popcorn Division was 12% instead of 18% and that residual income was a negative $15,000 instead of a positive $15,000. Under these circumstances, what will be the division’s reaction (accept or reject) for each flavor if it is being evaluated on the basis of residual income? (Assume that the minimum required rate of return is still 15%). Chocolate Chipolte Jalapeno a. Accept Accept Accept b. Accept Reject Accept c. Accept Reject Reject d. Reject Reject Accept e. Reject Reject Reject
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Use the information below for the next 2 questions: The Spinach division of Dewsnap Bologna Company had the following results for last year: Average operating assets . .............................. $1,420,000 Average current assets . ................................ $ 426,000 Controllable margin . .................................. $ 276,900 Sales . ................................................. $2,130,000 Minimum required rate of return . ................................ 18% 4. What is the residual income of the Spinach Division for last year? a.
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This note was uploaded on 03/02/2010 for the course MGMT 421-1234 taught by Professor Person during the Spring '10 term at Aarhus Universitet.

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Review Sheet Exam4 FALL20090 - Exam 4 Review Sheet Fall,...

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