Divisional income statements for the year 2006 for the two divisions of a company appear below.

1. Based on the data above, compute the ROI for the Eastern Division and the Western Division. Please use the Du Pont Model. Show all work and round to second decimal places.
2. The company is planning to invest an additional $600,000 in assets in one or the other of the divisions. Which division should the company expand? Why?
3. What is the advantage of using ROI rather than the dollar amount of income from operations to evaluate the performance of a division?
4. When a company decentralizes, what is the primary challenge that it faces? Explain briefly. A few sentences or two should do it.
5. Compute the Eastern Divisions residual income in the space below. The minimum acceptable rate of return is 9%. Show all work.

Eastern Division Western Division Sales Operating Expenses Operating Profit $5,000,000 4,000,000 $1,000,000 $4,500,000 3,100,000 $1,400,000 Invested Assets $6,000,000 $8,000,000