Francis Corp. has two divisions, Eastern and Western. The following information for the past year is for each division:

Francis has established a hurdle rate of 9 percent.

Required:

1. Compute each division’s return on investment (ROI) and residual income for last year. Determine which manager seems to be performing better.

2. Suppose Francis is investing in new technology that will increase each division’s operating income by \($144,000.\) The total investment required is \($1,600,000,\) which will be split evenly between the two divisions. Calculate the ROI and return on investment for each division after the investment is made.

3. Determine whether both managers will support the investment. Explain how their support will differ depending on which performance measure (ROI or residual investment) is used.

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Sales Cost of goods sold and operating expenses Operating Income Average invested assets Eastern Division $ 600,000 450,000 $ 150,000 $1,000,000 Western Division $ 900,000 600,000 $ 300,000 $1,500,000