Consolidated Gas Supply Corporation uses the investment center concept for the gasoline stations that it manages in the city. Consolidated has a 15% required rate of return on investment in order for a branch station to be viable. Select operating data for three of its stations for the current year are as follows:

Required:
a. Compute the return on investment for each station.
b. Which station manager is doing best based only on ROI?
c. Are any of the stations under performing?
d. Should the required rate of return be the same for each station if the business risks are different? Explain.

Question

Consolidated Gas Supply Corporation uses the investment center concept for the gasoline stations that it manages in the city. Consolidated has a 15% required rate of return on investment in order for a branch station to be viable. Select operating data for three of its stations for the current year are as follows:
  
Required:
a. Compute the return on investment for each station.
b. Which station manager is doing best based only on ROI?
c. Are any of the stations under performing?
d. Should the required rate of return be the same for each station if the business risks are different? Explain.

Quizplus · Accepted Answer

The Answer of Consolidated Gas Supply Corporation uses the investment center concept for the gasoline stations that it manages in the city. Consolidated has a 15% required rate of return on investment in order for a branch station to be viable. Select operating data for three of its stations for the current year are as follows:
  
Required:
a. Compute the return on investment for each station.
b. Which station manager is doing best based only on ROI?
c. Are any of the stations under performing?
d. Should the required rate of return be the same for each station if the business risks are different? Explain.

Consolidated Gas Supply Corporation Uses the Investment Center Concept for the Gasoline