投资回报率计算解析

中文完整详细的给出题目和答案的解析，标准答案都附在每个题后面了，题目中涉及到的所有计算和内容部分都要有完整的解析，还要告诉我涉及到的方法和原理，而且要通俗易懂19.22 The Biscuits division (Division B) and the Cakes division (Division C) are two divisions of a large, manufacturing company. While both divisions operate in almost identical markets, each division operates separately as an investment centre. Each month, operating statements must be prepared by each division and these are used as a basis for performance measurement for the divisions. Last month, senior management decided to recharge head office costs to the divisions. Consequently, each division is now going to be required to deduct a share of head office costs in its operating statement before arriving at ‘net profit’, which is then used to calculate return on investment (ROI). Prior to this, ROI has been calculated using controllable profit only. The company’s target ROI, however, remains unchanged at 20 per cent per annum. For each of the last three months, Divisions B and C have maintained ROIs of 22 per cent per annum and 23 per cent per annum respectively, resulting in healthy bonuses being awarded to staff. The company has a cost of capital of 10 per cent. The budgeted operating statement for the month of July is shown below :
B
C
($000) ($000)
Sales revenue
1,300
1,500
Less variable costs
(700)
(800)
Contribution
600
700
Less controllable fixed costs
(134)
(228)
Controllable profit
466
472
Less apportionment of head office costs
(155)
(180)
Net profit
311
292
Divisional net assets
$23.2m$22.6m a) Calculate the expected annualized return on investment(ROI) using the new method as preferred by senior management, based on the above budgeted operating statements, for each of the divisions. (a) Return on investment = Net profit/Net assets Division B = ($311,000 x 12)/$23,200,000 = 16.09% Division C = ($292,000 x 12)/$22,600,000 = 15.5% b) The divisional managing directors are unhappy about the results produced by your calculations in (a) and have heard that a performance measured called ‘residual income’ may provide more information.Calculate the annualized residual income (RI) for each of the divisions, based on the net profit figures for the month of July. （b）B C

($) ($)
Net profit ( monthly profit x 12)
3,732
3,504
Less : imputed interest charges :
2,320
$23.2m x 102,260$22.6mx10%
1,412
1,244
Residual income (c) Discuss the expected performance of each of thetwo divisions, using both ROI and, RI and making anyadditional calculations deemed necessary. Concludeas to whether, in your opinion, the two divisions haveperformed well. (c)Both divisions have ROIs below the target of 20 per cent suggesting that they have not performed well but this is because non-controllable head office costs are being allocated before calculating ROI. The ROIs using the old method before allocating head office expenses are: B: ($311,000 +$155,000) x 12/$23.2m = 24.1$292,000 + $180,000) x 12/$22.6m = 25.06% From this it can be seen that both divisions have actually improved their performance. The residual income figures indicate that both divisions have performed well by reporting positive figures, even when using net profit rather than controllable profit are used as the bases for the calculations. The cost of capital of the company is significantly lower than the target return on investment that the company is setting thus indicating that the divisions are adding value. (d) Division B has now been offered an immediate opportunity to invest in new machinery at a cost of $2.12 million. The machinery is expected to have a useful economic life of four years, after which it could be sold for$200,000. Division B’s policy is to depreciate all of its machinery on a straight line basis over the life of the asset. The machinery would be expected to expand Division B’s production capacity, resulting in an 8.5 percent increase in contribution per month. Recalculate Division B’s expected annualized ROI and annualized RI, based on July’s budgeted operating statement after adjusting for the investment. State whether the managing director will be making a decision that is in the best interests of the company as a whole if ROI is used as the basis of the decision. (d)Depreciation = ($2,120,000 -$200,000)/48 months = $40,000 per month. Net profit for July =$311,000 + ($600,000 x 8.5$40,000 = $322,000 Annualised net profit:$322,000 x 12 = $3,864,000 Net assets after investment =$23.2m + $2.12m =$25.32m ROI = $3.864m/25.32m = 15.26% Therefore, Division B will not proceed with the investment, since it will cause a decrease in its ROI. If RI is used the result is as follows :

($000) Annualized net profit after investment 3,864 Annualised net profit :$322,000 x 12=$3,864,000 ' Less imputed cost of capital Net assets after investment =$23.2m+$2.12m=$25.32m
(10% x $25.32m) 2,532 Residual income 1,332 Since the residual income is lower with the invest - ment the divisional manager will be reluctant to invest if he or she focuses on the short term To ascertain whether the investment is in the best interests for the company as whole the NPV should be calculated : ($000)
PV of annual cash inflows ($600,000x8.5$612,000) x Annuity factor
at 10% for 4 years (3.170)
1,940
PV of sale proceeds in year 4($200,000 x
0.909)
182
2,112
Investment cost
2,120
NPV
-8
The project has a negative NPV and should be rejected . Therefore both performance measures encourage goal congruence . (e) Explain any behavioural problems that will result if thecompany’s senior management insist on using solelyROI, based on net profit rather than controllable profit,to assess divisional performance and reward staff. (e) The staff in both divisions have been used to achieving the targets and being rewarded for this. Suddenly, they find that even though divisional performance has improved, neither division is achieving its ROI target.

This is a result of including the allocation of head office costs in the performance measure. Managerial evaluation should not be based on the allocation of uncontrollable costs but if senior management have reasons for doing so the target ROI should be revised upwards. Staff are likely to become demotivated with the new system, which is clearly unfair. This is likely to result in the dysfunctional consequences.