Hilton Hotels Corporation provides lodging services around the world. The company is separated into three major divisions:
- Hotel Ownership: Hotels owned and operated by Hilton.
- Managing and Franchising: Hotels franchised to others or managed for others.
- Timeshare: Resort properties managed for timeshare vacation owners.
Financial information for each division, from a recent annual report, is as follows (in millions):
|
Hotel |
Managing and |
|
|
Ownership |
Franchising |
Timeshare |
Revenues |
$2,215 |
$1,510 |
$421 |
Income from operations |
394 |
343 |
99 |
Total assets |
4,825 |
2,112 |
507 |
a. Use the DuPont formula to determine the return on investment for each of the Hilton business divisions. Round whole percents to one decimal place and investment turnover to one decimal place.
b. Determine the residual income for each division, assuming a minimum acceptable income of 14% of total assets. Round minimal acceptable return to the nearest million dollars.
c. Interpret your results.