Exercise 11-12 Evaluating New Investments Using Return on Investment (ROI) and Residual Income [LO11-1, LO11-2] Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Division A Division B Division C Sales $15,400,000 $28,320,000 $25,400,000 Average operating assets assets $ 3,080,000 $ 7,080,00 $ 5,080,000 Net operating ang $ s 693,000 $ 396, 480 $ 736,600 income Minimum required 7.00% 7.50% 14.50% rate of return Required: 1. Compute the return on investment (ROI) for each division using the formula stated in terms of margin and turnover 2. Compute the residual income (loss) for each division 3. Assume that each division is presented with an investment opportunity that would yield a 8% rate of return a. If performance is being measured by ROI, 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? Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req 3A Reg 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 Division A Division B Division C Reg 2 > Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Reg 3A Req 38 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) Reg1 Req3A > Reg 1 Reg 2 Req Req 3B Assume that each division is presented with an investment opportunity that would yield a 8% 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 Complete this question by entering your answers in the tabs below. Reg 1 Reg 2 Req Reg 3B Assume that each division is presented with an investment opportunity that would yield a 8% rate of return. If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity? Division A Don B Division C & Req 3A