follows: Insert Home A Vita G 1 23-36 ROI, RI, DuPont method investment decisions, balanced Scorecard. News Report Group has wo major divisions: Print and Internet. Summary financial data lillions) for 2016 and 2017 are us Please complete 23-37 Page Layout Formus Data B D E F H Operating Income Revenues Total Assets 2 2016 2017 2016 2017 2016 2017 3 Print $3,720 $4,500 $18,700 $22,500 $18,200 $25,000 4 Internet 525 690 25,000 23,000 11,150 10,000 The two division managers' annual bonuses are based on division ROI (defined as operating income divided by total assets). If a division reports an increase in ROI from the previous year, its management is automati- cally eligible for a bonus, however, the management of a division reporting a decline in ROI has to present an explanation to the News Report Group board and is unlikely to get any bonus. Carol Mays, manager of the Print division, is considering a proposal to invest $2,580 million in a new computerized news reporting and printing system. It is estimated that the new system's state-of-the-art graphics and ability to quickly incorporate late-breaking news into papers will increase 2018 division operating income by S360 million. News Report Group uses a 10% required rate of return on investment for each division 1. Use the DuPont method of profitability analysis to explain differences in 2017 ROIs between the two divisions. Use 2017 total assets as the investment base. 2. Why might Mays be less than enthusiastic about accepting the investment proposal for the new system despite her belief in the benefits of the new technology? 3. John Mendenhall, CEO of News Report Group, is considering a proposal to base division executive compensation on division RI Compute the 2017 Rl of each division Would adoption of an RI measure reduce Mays's reluctance to adopt the new computerized system investment proposal? Mendenhallis concerned that the focus on annual ROI could have an adverse long-run effect on News Report Group's customers. What other measurements, if any, do you recommend that Mendenhall use? Explain briefly Need 23-37 23-37 Division managers' compensation, levers of control (continuation of 23-36). John Mendenhall seks your advice on revising the existing bonus plan for division managers of News Report Group. Assume ision managers do not like bearing risk. Mendenhall is considering three ideas. Make each division manager's compensation depend on division RI. Make each division manager's compensation depend on company-wide RI. Use benchmarking and compensate division managers on the basis of their division's Rl minus the RI of the other division 1. Evaluate the three ideas Mendenhall has put forth using performance-evaluation concepts described in this chapter. Indicate the positive and negative features of each proposal. 2. Mendenhall is concerned that the pressure for short-run performance may cause managers to cut corners. What systems might Mendenhall introduce to avoid this problem? Explain briefly. 3. Mendenhall is also concerned that the pressure for short-run performance might cause managers to ignore emerging threats and opportunities. What system might Mendenhall introduce to prevent this problem? Explain briefly. follows: Insert Home A Vita G 1 23-36 ROI, RI, DuPont method investment decisions, balanced Scorecard. News Report Group has wo major divisions: Print and Internet. Summary financial data lillions) for 2016 and 2017 are us Please complete 23-37 Page Layout Formus Data B D E F H Operating Income Revenues Total Assets 2 2016 2017 2016 2017 2016 2017 3 Print $3,720 $4,500 $18,700 $22,500 $18,200 $25,000 4 Internet 525 690 25,000 23,000 11,150 10,000 The two division managers' annual bonuses are based on division ROI (defined as operating income divided by total assets). If a division reports an increase in ROI from the previous year, its management is automati- cally eligible for a bonus, however, the management of a division reporting a decline in ROI has to present an explanation to the News Report Group board and is unlikely to get any bonus. Carol Mays, manager of the Print division, is considering a proposal to invest $2,580 million in a new computerized news reporting and printing system. It is estimated that the new system's state-of-the-art graphics and ability to quickly incorporate late-breaking news into papers will increase 2018 division operating income by S360 million. News Report Group uses a 10% required rate of return on investment for each division 1. Use the DuPont method of profitability analysis to explain differences in 2017 ROIs between the two divisions. Use 2017 total assets as the investment base. 2. Why might Mays be less than enthusiastic about accepting the investment proposal for the new system despite her belief in the benefits of the new technology? 3. John Mendenhall, CEO of News Report Group, is considering a proposal to base division executive compensation on division RI Compute the 2017 Rl of each division Would adoption of an RI measure reduce Mays's reluctance to adopt the new computerized system investment proposal? Mendenhallis concerned that the focus on annual ROI could have an adverse long-run effect on News Report Group's customers. What other measurements, if any, do you recommend that Mendenhall use? Explain briefly Need 23-37 23-37 Division managers' compensation, levers of control (continuation of 23-36). John Mendenhall seks your advice on revising the existing bonus plan for division managers of News Report Group. Assume ision managers do not like bearing risk. Mendenhall is considering three ideas. Make each division manager's compensation depend on division RI. Make each division manager's compensation depend on company-wide RI. Use benchmarking and compensate division managers on the basis of their division's Rl minus the RI of the other division 1. Evaluate the three ideas Mendenhall has put forth using performance-evaluation concepts described in this chapter. Indicate the positive and negative features of each proposal. 2. Mendenhall is concerned that the pressure for short-run performance may cause managers to cut corners. What systems might Mendenhall introduce to avoid this problem? Explain briefly. 3. Mendenhall is also concerned that the pressure for short-run performance might cause managers to ignore emerging threats and opportunities. What system might Mendenhall introduce to prevent this problem? Explain briefly
