O'Malley Company requires a return on capital of 15 percent. The following information is available for 2016:
Required:
a. Compute return on investment using both book and current values for each division. (Round answer to three decimal places.)
b. Compute residual income for both book and current values for each division.
c. Does book value or current value provide the better basis for performance evaluation?
d. Which division do you consider the most successful?

Question

O'Malley Company requires a return on capital of 15 percent. The following information is available for 2016:
  Required: 
a. Compute return on investment using both book and current values for each division. (Round answer to three decimal places.)
b. Compute residual income for both book and current values for each division.
c. Does book value or current value provide the better basis for performance evaluation?
d. Which division do you consider the most successful?

Quizplus · Accepted Answer

The Answer of O'Malley Company requires a return on capital of 15 percent. The following information is available for 2016:
  Required: 
a. Compute return on investment using both book and current values for each division. (Round answer to three decimal places.)
b. Compute residual income for both book and current values for each division.
c. Does book value or current value provide the better basis for performance evaluation?
d. Which division do you consider the most successful?

O'Malley Company Requires a Return on Capital of 15 Percent