5 Part A: Acceptance of New Project (4 marks) Last year's segment margin for Claremont Division is shown below in Column B. Its current operating assets are also shown in column B. The division is considering purchasing equipment at the beginning of the year that will increase annual segment margin (both shown in Column C). Segment Margin (operating income of the division) Average operating assets (investment in assets) Last Year $ $ Purchase of equipment 62,539 $ 14,000 219,000 $ 59,000

Part A: Acceptance of New Project (4 marls) Last year's segment margin for Claremont Division is shown below in Column B. Its current operating assets are also shown in column B. The division is considering purchasing equipment at the beginning of the year that will increase annual segment margin (both shown in Column C). If the equipment is purchased, what will happen to the return on investment for Claremont Division? Will the division manager want to purchase the equipment if their bonus is based on return on investment? You MUST use question data and your answers of ROI in order to earn marks ( 2 marks) Based on residual income, which projects should the company pursue? Why? You must explain your answer using your calculations above. What do your calculations mean? What does residual income Based on residual income, which projects should the company pursue? Why? You must explain your answer using your calculations above. What do your calculations mean? What does residual income mean? Explain in a way that a non-accountant can understand. Otherwise, no marks awarded. (2 marks)