Consider the following data for the two geographical divisions of the Potomac Electric company that operate as profit centres:

	Atlantic Division	Pacific Division
Total Assets	$1,000,000	$5,000,000
Current Liabilities	250,000	1,500,000
Operating Income	200,000	750,000

Required:

1. Calculate the ROI for each division using operating income as the measure of income and total assets as the measure of investment.

2. Potomac Electric has used RI as a measure of management performance, the variable it wants a manager to maximize. Using this criterion, what is the RI for each division using operating income and total assets, if the required rate of return on investment is 12%?

3. Potomac Electric has two sources of funds: long-term debt with a market value of $3,500,000 and an interest rate of 10%, and equity capital with a market value of $3,500,000 at a cost of 14%. Potomac