Harbor Division has total assets (net of accumulated depreciation) of $620,000 at the beginning of year 1. One of the assets is a machine that has a net book value of $66,000. Expected divisional income in year 1 is $87,000 including $7,000 in income generated by the machine (after depreciation). Harbors cost of capital is 10 percent. Harbor is considering disposing of the asset today (the beginning of year 1).

Required:

a. Harbor computes ROI using beginning-of-the-year net assets. What will the divisional ROI be for year 1 assuming Harbor retains the asset? (Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).)

b. What would divisional ROI be for year 1 assuming Harbor disposes of the asset for its book value (there is no gain or loss on the sale)? (Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).)

c. Harbor computes residual income using beginning-of-the-year net assets. What will the divisional residual income be for year 1 assuming Harbor retains the asset?

d. What would divisional residual income be for year 1 assuming Harbor disposes of the asset for its book value (there is no gain or loss on the sale)?