Section 11 - Chap 10&11

Section 11 - Chap 10&11 - AEM 323 Section Problem...

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AEM 323 Section Problem Set 11 Chapter 10 Problem 1 1. What is meant by a decentralized organization? 2. Distinguish between a cost center, a profit center, and an investment center. 3. What is meant by the terms margin and turnover ? 4. What is the equation for return on investment (ROI)? What is the expanded equation for ROI using the Du Pont method? 5. What are the three basic approaches to improving return on investment (ROI)? 6. What is meant by residual income? 7. What are the advantages of using Economic Value Added instead of ROI as a gauge of success? 1
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Problem 2 Calculate the margin, turnover, and ROI for each division. Use residual income to evaluate each division’s performance. Trading Investment Banking Private Bank Retail Bank Commercial Bank Revenue $6,000 $8,000 $1,200 $18,000 $11,000 Net Operating Income $1,500 $3,400 $800 $1,200 $400 Average Operating Assets $3,500 $2,000 $800 $12,000 $10,000 Minimum Required Rate of Return 30% 18% 15% 8% 12% Division Which divisions would probably accept an investment opportunity yielding a 20% rate of
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This note was uploaded on 08/31/2010 for the course AEM 3230 taught by Professor Little,j.e. during the Spring '08 term at Cornell.

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Section 11 - Chap 10&11 - AEM 323 Section Problem...

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