Holmes Electronics Ltd.has three divisions: Resistors, Semiconductors and Transistors, each located in a different geographic region.Data for its most recent year are presented below:
The company is currently using a required rate of return of 16 percent.Required:
a.Compute the ROI using both book value and current value for all divisions.Round to four decimal places.
b.Compute residual income using book value and current value for all divisions.
c.Does book value or current value provide the better basis for performance evaluation? Why? Which division is the most successful?

Question

Holmes Electronics Ltd.has three divisions: Resistors, Semiconductors and Transistors, each located in a different geographic region.Data for its most recent year are presented below:
  The company is currently using a required rate of return of 16 percent.Required:
a.Compute the ROI using both book value and current value for all divisions.Round to four decimal places.
b.Compute residual income using book value and current value for all divisions.
c.Does book value or current value provide the better basis for performance evaluation? Why? Which division is the most successful?

Quizplus · Accepted Answer

The Answer of Holmes Electronics Ltd.has three divisions: Resistors, Semiconductors and Transistors, each located in a different geographic region.Data for its most recent year are presented below:
  The company is currently using a required rate of return of 16 percent.Required:
a.Compute the ROI using both book value and current value for all divisions.Round to four decimal places.
b.Compute residual income using book value and current value for all divisions.
c.Does book value or current value provide the better basis for performance evaluation? Why? Which division is the most successful?