=+20-25 K ROI, RI, EVA® and performance evaluation OBJECTIVES 3, 4, 5, 8 Telum Ltd manufactures electronic devices and competes on the basis of quality and leading-edge designs. The company has

$1750000 invested in assets in its Mobile Phone Division. After-tax operating profit from sales of mobile phones this year is

$325000. The Tablet Division has $6000000 invested in assets and an after-tax operating profit this year of $1050000. Income for the Mobile Phone Division has grown steadily over the last few years. The weighted-average cost of capital for Telum Ltd is 9%

and the previous period’s after-tax return on investment for each division was 13%. The CEO of Telum Ltd has told the manager of each division that the division that ‘performs best’ this year will get a bonus.

Required 1 Calculate the ROI and residual income for each division of Telum Ltd, and briefly explain which manager will get the bonus.