Multinational performance measurement. The Sandvik Corporation manufactures elec¬

tric motors in Canada and Sweden. The Canadian and Swedish operations are organized as decentralized divisions. The following information is available for 2007:

joSLL Canadian Division Swedish Division Operating income $1,440,000 7,862,400 kronor Total assets $9,600,000 50,400,000 kronor Assume that the exchange rate at the time of Sandvik’s investment in Sweden on December 31, 2006, was 6 kronor = $1. During 2007, the Swedish krona declined steadily in value so that the exchange rate on December 31, 2007, is 7 kronor = $1. The average exchange rate during 2007 is [(6 + 7) * 2] = 6.5 kronor = $1.

Required 1. Calculate the Canadian Division’s return on investment for 2007.

2. Calculate the Swedish Division’s return on investment for 2007 in kronor.

3. Senior management at Sandvik wants to know which division earned a better return on investment in 2007. What would you tell them? Explain your answer.