Burnard Kaiser, the CEO of Atlantis Inc., evaluates the information available on three of Atlantis’s major product divisions (in thousands of euros):

1. Calculate for each division the rate of return on net assets and the economic profit based on historical cost and on replacement cost. For purposes of calculating economic profit, use 10% as the cost of capital.

2. Rank the performance of each division under each of the four different measures computed in number 1.

3. What do these measures indicate about the performance of the divisions? Of the division managers? Which measures do you prefer? Why?  

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Division Television Air Conditioning Microwave Oven Average Net Assets Based On Historical Cost Replacement Cost €45,000 132,000 81,000 €48,000 165,000 144,000 Operating Income Based On* Historical Cost Replacement Cost €7,800 20,250 15,000 €7,500 18,450 11,700