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# Tundra Services Company, a division of a major oil company Answer

Tundra Services Company, a division of a major oil company Answer

Tundra Services Company, a division of a major oil company Answer

1.value:
Tundra Services Company, a division of a major oil company, provides various services to the operators of the North Slope oil field in Alaska. Data concerning the most recent year appear below:
Sales \$ 18,100,000
Net operating income \$ 6,400,000
Average operating assets \$ 36,400,000
Required:
Margin %
2 Compute the turnover for Tundra Services Company. (Round your answer to 2 decimal place.)
Turnover
3 Compute the return on investment (ROI) for Tundra Services Company. (Round your intermediate calculations and final answer to 2 decimal places. Omit the “%” sign in your response.)
ROI %
5
value:
10.00 points
2 The entrepreneur who founded the company is convinced that sales will increase next year by 130% and that net operating income will increase by 360%, with no increase in average operating assets. What would be the company’s ROI? (Do not round intermediate calculations. Round your answer to 2 decimal places. Omit the “%” sign in your response.)
ROI %
6
value:
10.00 points
A family friend has asked your help in analyzing the operations of three anonymous companies operating in the same service sector industry. Supply the missing data in the table below: (Loss amounts should be indicated by a minus sign. Round your answers to the nearest whole number. Omit the “\$” and “%” signs in your response.)
Company
A B C
Sales \$300,000 \$740,000 \$520,000
Net operating income \$ \$44,000 \$
Average operating assets \$168,000 \$ \$152,000
Return on investment (ROI) 19% 15% %
Minimum required rate of return:
Percentage 14% % 15%
Dollar amount \$ \$45,000 \$
Residual income \$ \$ \$6,000
7
value:
10.00 points
Selected sales and operating data for three divisions of three different companies are given below:
Division A Division B Division C
Sales \$ 5,400,000 \$ 9,400,000 \$ 8,500,000
Average operating assets \$ 1,080,000 \$ 4,700,000 \$ 1,700,000
Net operating income \$ 243,000 \$ 799,000 \$ 148,750
Minimum required rate of return 14 % 17 % 11 %
Required:
1 Compute the return on investment (ROI) for each division, using the formula stated in terms of margin and turnover. (Do not round intermediate calculations. Round your answers to 2 decimal places. Omit the “%” sign in your response.)
ROI
Division A %
Division B %
Division C %
2 Compute the residual income for each division. (Negative amounts should be indicated by a minus sign. Leave no cells blank – be certain to enter “0” wherever required. Omit the “\$” sign in your response.)
Division A Division B Division C
Residual income \$ \$ \$
3 Assume that each division is presented with an investment opportunity that would yield a rate of return of 16%.
a. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity?
Division A (Click to select)RejectAccept
Division B (Click to select)AcceptReject
Division C (Click to select)RejectAccept
b. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity?
Division A (Click to select)AcceptReject
Division B (Click to select)RejectAccept
Division C (Click to select)RejectAccept

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