Altoona Technologies, Inc. (ATI) has three divisions. ATI has a desired rate of return of 12.5 percent. The operating assets and income for each division are as follows:

Divisions	Operating Assets				Operating Income
Printer	$	540,000			$	96,000
Copier		810,000				90,000
Fax		360,000				54,000
Total	$	1,710,000			$	240,000

ATI headquarters has $120,000 of additional cash to invest in one of its divisions. The division managers have identified investment opportunities that are expected to yield the following ROIs:

	Expected ROIs for
Divisions	Additional Investments
Printer	14.0	%
Copier	13.0	%
Fax	12.0	%

Required

a-1. Calculate the ROI for each division.

a-2. Which division manager is currently producing the highest ROI?

b. Based on ROI, which division manager would be most eager to accept the $120,000 of investment funds?

c. Based on ROI, which division manager would be least likely to accept the $120,000 of investment funds?

d. Which division offers the best investment opportunity for ATI?

g. Calculate the residual income:

(1) At the corporate (headquarters) level before the additional investment.

(2) At the division level before the additional investment.

(3) At the investment level.

(4) At the division level after the additional investment.

Req A1:

	ROI
Printer division		%
copier division		%
fax division		%

Req A2-D

A-2	Which division manager is currently producing the highest ROI?
b	ased on ROI, which division manager would be most eager to accept the $120,000 of investment funds?
c	Based on ROI, which division manager would be least likely to accept the $120,000 of investment funds?
d	Which division offers the best investment opportunity for ATI?

ReqG1

residual income

ReqG2 to G4:

		residual income (loss)
(2)	Printer Division
	Copier Division
	Fax Division
(3)	Printer Division
	Copier Division
	Fax Division
(4)	Printer Division
	Copier Division
	Fax division