Refer to the preceding problem about Nevada Aggregates, Inc.

Required:

1. Explain three ways the Division B manager could improve her division’s ROI. Use numbers to illustrate these possibilities.

2. Suppose Division A’s sales margin increased to 25 percent, while its capital turnover remained constant. Compute the division’s new ROI.

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Division B Division C Division A Sales revenue $10,000,000 $2,000,000 $2,500,000 Income $400,000 Average investment Sales margin Capital turnover 25% 20% 1 20% ROI Residual income ? $120,000