Impact of New Project on Performance Measures (L.O.2): A division manager is considering the acquisition of a new asset that will add to profit. The division is expected to earn $750,000 on other assets of $2.7 million. The company's cost of capital is 20 percent. The new investment has a cost of $450.000 and will have a yearly cash flow of $167,000. The asset will be depreciated using the straight-line method over a six-year life and is expected to have no salvage value. The new asset meets the company's discounted cash flow investment criteria. Division performance is measured using an investment base of the original cost of division assets.

Required:

a. What is the division ROI before acquisition of the new asset?

b. What is the division ROI after acquisition of the new asset?