Multinational performance measurement, ROI, RI. Fabulous Skin has been manufactur-

2. Charter Division bonuses:

June, $0; December, $6,600 ing sun lotions for six decades and currently has a very solid position in the industry. It has two divisions that manufacture and market sun lotions, one located in Spain that attends the Mediterranean market, and the other in Halifax that attends the Caribbean market (including the US). The following information is available for 2009. The required rate of return on investments is 15%.

Investments in both divisions were made on December 31, 2008. The exchange rate at the time of investment in Spain on December 31, 2008, was 0.60 euros = $1. During 2009, the euro declined steadily in value, reaching an exchange rate on December 31, 2009, of 0.75 euros = $1. The average exchange rate during 2009 is [(0.60 + 0275) "2 P= 0.675 euros = $1.
REQUIRED 1.

a. Calculate the Canadian Division’s return on investment for 2009.

b. Calculate the Spanish Division’s return on investment for 2009 in euros.

c. Which division earned a better return on investment in 2009? Explain.
2. Senior management wants to compare the performance of the two divisions using residual income. Which division do you think had the better residual-income performance? Explain your answer.
3. On the basis of your answers to requirements 1 and 2, which division is performing better?
If you had to promote one of the division managers to vice-president, which would you choose? Explain.LO1

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Operating income Total assets Canadian Division $918,000 $5,400,000 Spanish Division 648,000 euros 3,600,000 euros