5A is a important question

patronics Corporation, a massive retailer of electronic products, is organized in four separate divisions. The four divisional nagers are evaluated at year-end, and bonuses are awarded based on ROI, Last year, the company as a whole produced a 15 cent return on its Investment. ring the past week, management of the company's Northeast Division was approached about the possibility of buying a competitor had decided to redirect its retail activities. If the competitor is acquired, it will be acquired at its book value.) The data that follow ate to recent performance of the Northeast Division and the competitor: Sales Variable costs Fixed costs Envented capital Northeast Division $4,240,000 756 of sales $ 856,000 $ 850,000 Competitor $2,640,000 700 of sales $ 108,000 $ 300,000 anagement has determined that in order to upgrade the competitor to Megatronics' standards, an additional $120,000 of invested pital would be needed. quired: 1. Compute the current ROI of the Northeast Division and the division's Rolf the competitor is acquired 2. If divisional management is being evaluated on the basis of ROI, will the Northeast Division likely pursue acquisition of the competitor? -a. Compute the ROI of the competitor as it is now and after the intended upgrade b. If ROI is used as the basis for evaluation, would Megatronics Corporation likely be in favor of the acquisition of the competitor? 4. Calculate the Northeast Division's ROI after acquisition of competitor but before upgrading. -a. Assume that Megatronics uses residual income to evaluate performance and desires a 10 percent minimum return on invested capital. Compute the current residual income of the Northeast Division and the division's residual income if the competitor is acquired. 5-b. If divisional management is being evaluated on the basis of residual income, will the Northeast Division likely pursue acquisition of the competitor? Complete this question by entering your answers in the tabs below. Reg1 Reg 2 Reg 3A Req 38 Reg4 Req5A Reg 5B Assume that Megatronics uses residual income to evaluate performance and desires a 10 percent minimum return on invested capital. Compute the current residual income of the Northeast Division and the division's residual income if the competitor is acquired. Current residual income Residual income of competitor is acquired