Andere Media Group has three major divisions:

Newspapers.

Television.

Film studios.

Summary financial data (in millions of shillings) for years 2009 and 2010 is given as follows:

Operating income Revenue Total assets

Year 2009 20102009201020092010

Sh. Sh. Sh.Sh. Sh. Sh.

Newspapers900 1,1004,5004,6004,4004,900

Television130160 6,0006,4002,7003,000

Film studios 220 2001,6001,6502,5002,600

The manager of each division has an annual bonus plan based on his division's return on investment

(ROI). The company defines ROI as operating income divided by total assets. Senior executives from divisions reporting increases in the division's ROI from the prior year are automatically eligible for a bonus. Senior executives of division reporting a decline in ROI have to provide persuasive explanations for the decline. In order to be eligible for any bonus and they are limited to 50% of the bonus paid to the division managers reporting an increase in ROI.

J. Kandie, manager of the newspapers division is considering a proposal to invest Sh. 200 million in a fast speed printing process with colour options. The estimated increment to year 2011 operating income would be Sh. 30 million. The media group has a 12% required rate of return for investments in all three divisions.

Required:

i) Use the Dupont Method to explain differences among the three divisions in their 2010 ROI.(Use 2010 total assets as the denominator).

[8 Marks]

ii) Explain whether J Kandie should undertake the fast-speed printing press investments proposal.