Business, 01.05.2021 17:20 leomcintyre12

ABC Company develops and manages real estate properties. It operates two divisions: Commercial Real Estate and Residential Real Estate. The Commercial division leases long-term warehouse space. The Residential division rents upscale apartments, typically under short-term leases and is subject to high turnover. The financial information for each division is presented below: Commercial Residential $ 800,000 Total Assets 1,000,000 Revenues 1,200,000 750,000 120,000 Operating Income 90,000 1. Use the DuPont formula to determine the return on investment for each division.
2. Determine the residual income for each division, assuming a minimum acceptable return of 10% of total assets. Assuming each division's employees share in any positive residual income in the amount of 25%, how much is each division's bonus pool?
3. Interpret the results by analyzing the components of return on investment. What is a possible explanation for the results? What are the areas needing improvement?
4. Assume that the Residential division can outsource the apartment building's recreational facilities resulting in increased expense of $15,000 and a reduction of assets of $375,000. Recompute return on investment using the DuPont formula and interpret the results. Should this course of action be taken?

Answers: 1

Show answers

Another question on Business

Business, 21.06.2019 17:10

Which statement describes a monopoly? many firms produce identical products with no control over the market price. many firms produce differentiated products with control over market price. a single firm produces a product with no close substitutes and control over the market price. a single firm produces a product with many close substitutes and limited control over the market price.

Answers: 1

Answer

Business, 21.06.2019 20:00

To be able to better compare stock performance within the same industry, similar companies are grouped into? a)market sectors b) industry blocks c) performance sectors d) average earning blocks

Answers: 1

Answer

Business, 22.06.2019 11:30

Which of the following statements about cash basis accounting is true? a. it is more complicated than accrual basis accounting. b. the irs allows all types of corporations to use it. c. it follows gaap standards. d. it ensures the company always knows how much cash flow it has.

Answers: 2

Answer

Business, 22.06.2019 17:30

Fabian got into an accident on his way to work. he had multiple fractures in his leg. his doctor advised strict bed rest for at least three months.fabian is a freelance wildlife photographer who usually works on a contract basis, and this is his primary source of income. before the accident, fabian was planning his finances. which goal of his financial plan would fabian in getting through without pay for the next three months? the goal that requires the creation of a/an would fabian get through the next three months without pay.

Answers: 1

Answer

You know the right answer?

ABC Company develops and manages real estate properties. It operates two divisions: Commercial Real...

Questions