Selected sales and operating data for three divisions of a multinational structural engineering firmare provided below:

Required:

1. Compute the ROI for each division using the formula stated in terms of margin and turnover.

2. Compute the RI for each division.

3. Assume that each division is presented with an investment opportunity that would yield a 13% rate of return.

a. If performance is being measured by ROI, which division(s) will probably accept the opportunity? Reject the opportunity? Why?

b. If performance is being measured by RI, which division(s) will probably accept the opportunity? Reject the opportunity? Why?

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Division Asia Europe North America $25,000,000 Sales $12,000,000 $14,000,000 Average operating assets $ 5,000,000 $ 400,000 $ 3,000,000 $10,000,000 Net operating income $ 420,000 $ 1,000,000 Minimum required rate of return 14% 10% 16%