Berita Terkini Group has two major divisions: Print and Internet. Summary financial data (in millions) for 2019 and 2020 are as follows:

Division	Operating Income		Revenues		Total Assets
	2019	2020	2019	2020	2019	2020
	RM	RM	RM	RM	RM	RM
Print	3,720	4,500	18,700	22,500	18,200	25,000
Internet	525	690	25,000	23,000	11,150	10,000

The two division managers annual bonuses are based on division ROI (defined as operating income divided by total assets). If a division reports an increase in ROI from the previous year, its management is automatically eligible for a bonus; however, the management of a division reporting a decline in ROI has to present an explanation to the Berita Terkini Group board and is unlikely to get any bonus.

Carlos, the manager of the Print division, is considering a proposal to invest RM2,580 million in a new computerised news reporting and printing system. It is estimated that the new systems state-of-the-art graphics and ability to quickly incorporate late-breaking news into papers will increase the divisions operating income in 2020 by RM360 million. Berita Terkini Group uses a 10% required rate of return on investment for each division.

Required:

1. Use the DuPont method of profitability analysis to explain differences in 2020 ROIs between the two divisions. Use 2020 total assets as the investment base.

(6 marks)

2. Why might Carlos be less than enthusiastic about accepting the investment proposal for the new system despite his belief in the benefits of the new technology? Discuss.

(5 marks)

3. Jaafar, CEO of Berita Terkini Group, is considering a proposal to base division executive compensation on division RI.
   1. Compute the 2020 RI of each division.

(2 marks)

2. Would adoption of an RI measure reduce Carlos reluctance to adopt the new computerised system investment proposal? Explain.

(3 marks)

4. Jaafar is concerned that the focus on annual ROI could have an adverse long-run effect on

Berita Terkini Groups customers. What other measurements, if any, do you recommend that Jaafar use? Explain briefly.

(4 marks)

5. Berita Terkini Group might also adopt benchmarking for performance evaluation. Explain the role of benchmarking in evaluating managers.

(5 marks)