Alternative problem E Goodwin Company has three segments, 1,2, and 3. Data regarding these segments follow: Segment 1 Segment ZSegment 3
Contribution to indirect s 432.000 $ 208,300 5 72,000
expenses
Assets directly used by and 3,600,000 1,440,000 360,000
identi?ed with the segment
a. Calculate the return on investment for each segment. Rank them from highest to lowest.
b. Assume the cost of capital is 10 per cent for a segment. Calculate the residual income for each segment. Rank
them from highest to lowest.
them from highest to lowest.
c. Repeat {b}, but assume the desired cost of capital is 14 per cent. Rank the segments from highest to lowest.
d. Comment on the rankings achieved.
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