9.36 The following information is available about the status and operations of Jay Art Company, which has a required ROI of 15% and discount rate of 12%: Division A Division B P 500,000 P 350,000 P 500,000 DOOR 000 Divisional investment P1,250,000 Divisional profit P 625,000 Variable cost P3,500,000 Divisional sales P1,500,000 P5,500,000 30 1. Division A could increase its sales by P300,000 by increasing its investment by P300,000. Compute its ROI. 2. Division A could increase its sales by P150,000 by increasing its investment by P400,000. Compute its total residual income. 3. Division B could reduce its investment so that its asset turnover increased by two, while holding total sales constant. Compute its residual income. 4. Division B could reduce its investment so that its asset turnover increased by two, while total sales increased by 10%.. Compute its ROI. 5. Division C is being considered to be added. This would require additional investment of P750,000. Upon addition this new division, the ROI for all the company's operations shall become 40%. What is the income or loss associated with the new investment? 6. If the manager of the division is evaluated on ROI alone, will the company invest on the new project? Why