Kentucky Homes, a producer of various RVs and trailer homes, has three divisions that are always competing for funds: RVs, Trailer Homes, and Campers. Ken Williams, CEO of Kentucky Homes, has usually just looked at the projects the subunits wanted to invest in and used his own judgment as to which ones made the most sense. This year he has decided to put his recent MBA to work for him and evaluate the top projects based on how well the subunits have performed with their existing capital. The subunits that have performed the best will get the most funds. Ken will still use his discretion to make sure good projects are not overlooked in the process, but he wants to have a clean starting point for evaluating the projects. He collects the following data on the three divisions (stated in millions of dollars).

REQUIRED:

a. Calculate the RI for each of the three divisions.

b. Calculate the ROI for each of the divisions.

c. Calculate the RONA for each of the divisions.

d. Calculate the ROE for each of the three divisions.

e. Which division is doing the best (for example, should receive more capital this year)? Why?

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Performance Metric RVs Trailer Homes Campers Net operating profit $375.80 $325.40 $272.60 Invested capital $950.80 $895.40 $750.40 Weighted average cost of capital 8.0% 8.5% 7.5% Net assets $1,598.60 $1,700.90 $1,650.80 Total equity $1,185.30 $1,230.50 $1,225.40