EXERCISE 9-12 Evaluating New Investments Using Return on Investment (ROI) and Residual Income [LO9-1, LO9-2] Selected sales and operating data for three divisions of different structural engineering firms are given as follows: Sales Average operating assets Net operating income Minimum required rate of return Division A $12,000,000 Division B $14,000,000 Division C $25,000,000 TAKE $3,000,000 $7,000,000 $5,000,000 TWO $600,000 14% $560,000 $800,000 Minimum required ra 10% 16% of return for all divisions = 17% 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 for each division. 3. Assume that each division is presented with an investment opportunity that would yield a 15% rate of retum. a. If performance is being measured by ROI, which division or divisions will probably accept the opportunity? Reject? Why? b. If performance is being measured by residual income, which division or divisions will probably accept the opportunity? Reject? Why