Colonial Pharmaceuticals is a start-up small firm specializing in new medications. It is organized into two divisions, which are based on the products they produce. AC Division is smaller and the life of the products it produces tend to be shorter than those produced by the larger SO Division. Selected financial data for the past year is shown below. Colonial Pharmaceuticals uses a 9 percent cost of capital for divisional performance analysis.

Business Unit	AC Division	SO Division
Sales revenue	$8,000,000	$20,000,000
After-tax operating profit	$1,200,000	$4,800,000
R&D expenditures	$2,000,000	$3,600,000
Divisional assets	$9,000,000	$80,000,000
Divisional current liabilities	$800,000	$4,000,000

R&D is assumed to have a two-year life in the AC Division and a nine-year life in the SO division. All R&D expenditures are spent at the beginning of the year. Since Colonial is a start-up, we can assume that no R&D expenditures had taken place before this year.

Required

1. Calculate ROI (using the DuPont formula) for the two divisions.
2. Compute residual income for the two divisions.
3. Compute EVA for the two divisions.
4. Briefly assess the financial performance of the two divisions based on your analysis.