omputing return on investment and residual income; investing decision A1 Megamart, a retailer of consumer goods, provides the following information on two of its departments (each considered an investment center) Average Investment Center Electronics Sporting goods Sales ncome Invested Assets $40,000,000 $2,880,000 $16,000,000 20,000,000 2,040,000 12,000,000 1. Compute return on investment for each department. Using return on investment, which department is most efficient at using 2. Assume a target income level of 12% of average invested assets. Compute residual income for each department. Which 3. Assume the electronics department is presented with a new investment opportunity that will yield a 15% return on investment. assets to generate returns for the company? department generated the most residual income for the company? Should the new investment opportunity be accepted? Explain
