Exercise 10-12 Evaluating New Investments Using Return on Investment (ROI) and Residual Income [LO10-1, LO10-2] Selected sales and operating data for three divisions of different structural engineering firms are given as follows Division A $7,400,000 1,480,000 $481,000 Division C $ 11,400,000 $10,500,000 $ 2,850,000 2,100,000 $ 1,197,000 393,750 Division B Sales Average operating assets Net operat Minimum required rate of return ng income 28.00% 42. 00% 25.00% Required: 1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnoven 2. Compute the residual income (loss) for each division 3. Assume that each division is presented with an investment opportunity that would yield a 30% rate of return. a. If performance is being measured by ROl, which division or divisions will probably accept or reject the opportunity? b. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity? Req 1 Req 2 Req 3A Req 3B Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Margin Turnover ROI Division A Division B Division C Req 1 Req 2 Req 3A Req 3B Compute the residual income (loss) for each division. (Do not round intermediate calculations. Loss amounts should be indicated by a minus sign.) Division A Division B Division C Residual income (loss) Req 1 Req 2 Req 3A Req 3B Assume that each division is presented with an investment opportunity that would yield a 30% rate of return. If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity? Division A Division B Division C Req 1 Req 2 Req 3A Req 3B Assume that each division is presented with an investment opportunity that would yield a 30% rate of return. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity? Division A Division B Division C