Hy tutor can I get question number 3 ans with explanations please thank you
he performance measurement and reward system, the managing directors are highly motivated to achieve, and exceed, their ROI targets. Jenice Cookson has just been appointed as a new management accountant in the head office, charged with redesigning the performance measurement system. As her first task, she has obtained the financial data for last year and the latest forecast for the current year, for each division, in thousands of dollars, as follows: Operating Profit ($) Sales Revenue ($) Divisional Assets ($) Target ROI (%) Last Current Last Current Last Current Last Current Year Year Year Year Year Year Year Year Newspaper 440 539 2 588 2 600 4 400 4 900 10 10 Brewing 950 1 100 4 750 4 500 5 000 6 471 18 16 Cable TV 200 350 1 800 850 6 660 7 000 2 3 Leonard Smith, the managing director of the brewing division, is concerned that his market share, and hence his ROI, is likely to suffer next year, as his main competitor has recently purchased new brewing technology. While his own brewing equipment is only ten years old, it is unable to produce the new varieties of beer that customers are demanding, and maintenance and operating costs are increasing. Smith is considering a proposal to invest $10 million in new equipment. This will probably increase next year's operating profit for his division by $1 million. Smith has analysed the future cash flows of this proposal, and the new acquisition will easily satisfy the minimum required rate of return of 10% for all new investments that is set for the Youngblood group. Without this acquisition, Smith expects his divisional ROI to drop to 14% next year. Required: 1. Calculate the ROI for each division for last year and the current year, as well as the two the three divisions. components of ROI: profit margin and return on assets. Comment on the relative performance of 2. Calculate the bonus that each managing director would earn in the two years. 3. Explain why Leonard Smith is reluctant to invest in the new brewing equipment. Provide calculations to back up your answer. 4. Jenice Cookson