value 500 points The Campus Division of AllStates Bank has a

value 5.00 points The Campus Division of All-States Bank has assets of $1,600 million. During the past year, the division had profits of $300 million. All-States Bank has a cost of capital of 9 percent. gnore taxes. Required: a. Compute the divisional ROl for the Campus Division. (Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).) visional ROI b. Compute the divisional RI for the Campus Division. (Enter your answer in dollars, not in millions.) ivisional RI

Solution

Solution:

(a) Divisional ROI for Campus Division

= Divisional Profits / Divisional Assets X 100

= $ 300,000,000 / $ 1,600,000,000 X 100

= 18.8 % (Answer)

*$ 1Million=$ 1,000,000

(b) Divisional RI for Campus Division

= Divisional Profits – Divisional Capital Charge*

= $ 300,000,000 - $144,000,000

= $ 156,000,000 (Answer)

*Capital Charge

=Divisional Assets X Cost of capital

= $ 1,600,000,000 X 9%

= $144,000,000