Mavers Ltd. is a divisionalized company. Decisions about bonuses and promotions for Divisional Managers are at the discretion of the company's Directors, but are significantly influenced by each division's retum on investment (ROI). For the purposes of ROI calculations, fixed assets are measured at their net book value at the end of the financial year. The following forecasts are available for the company's three divisions for the year ended 31 st Decerrber 2019 : Aller tne aoove rorecasts were prepared, one possible extra project was identitied tor eacn division. These projects would commence on 1st January 2019, and each Divisional Manager must decide by that date as to whether or not to accept his or her division's possible extra project. Details of these possible extra projects (which would continue for several years if accepted) are as follows: Division A could increase its market share. This would result in extra sales of Tk.3,20,000 in 2019 and Tk.400,000 in each subsequent year. The profit margin on sales would be 20%. The only additional investment required would be an increase of Tk.6,50,000 in the division's working capital for the duration of the project. - Division B could invest Tk. 8,00,000 in new technology which would improve the productivity of the division's manufacturing facilities. This extra investment would be depreciated on a straight-line basis over a 10 -year life, and an additional investment of Tk.2,40,000 in the division's working capital would also be required for the duration of the project. The productivity improvement would result in increased sales of Tk. 2,60,000 in 2019 and Tk. 3,60,000 in each year thereafter. The profit margin on sales would be 30%, before taking account of depreciation. - Division C could invest Tk.1,60,000 in a new delivery vehicle, which would be depreciated at a rate of 40% per annum on a diminishing balance basis. Annual sales would increase by TK.1,20,000, and the profit margin on sales would be 25% before depreciation. An additional working capital investment of Tk. 40,000 would also be required. Required: a. For 2019, calculate each of the following: - The ROI for each division, and for Mavers Ltd. as a whole, assuming that the extra projects are not accepted. - The expected ROI for each of the three extra projects. b. Calculate the ROI of each extra project for 2019 . c. Explain 'whether each Divisional Manager is likely to accept his or her division's proposed extra project and what decision would be in the best interests of the company's shareholders in each case, insofar as is possible from the information available. (Indicate any reservations which you may have about the comprehensiveness of the information available). Mavers Ltd. is a divisionalized company. Decisions about bonuses and promotions for Divisional Managers are at the discretion of the company's Directors, but are significantly influenced by each division's retum on investment (ROI). For the purposes of ROI calculations, fixed assets are measured at their net book value at the end of the financial year. The following forecasts are available for the company's three divisions for the year ended 31 st Decerrber 2019 : Aller tne aoove rorecasts were prepared, one possible extra project was identitied tor eacn division. These projects would commence on 1st January 2019, and each Divisional Manager must decide by that date as to whether or not to accept his or her division's possible extra project. Details of these possible extra projects (which would continue for several years if accepted) are as follows: Division A could increase its market share. This would result in extra sales of Tk.3,20,000 in 2019 and Tk.400,000 in each subsequent year. The profit margin on sales would be 20%. The only additional investment required would be an increase of Tk.6,50,000 in the division's working capital for the duration of the project. - Division B could invest Tk. 8,00,000 in new technology which would improve the productivity of the division's manufacturing facilities. This extra investment would be depreciated on a straight-line basis over a 10 -year life, and an additional investment of Tk.2,40,000 in the division's working capital would also be required for the duration of the project. The productivity improvement would result in increased sales of Tk. 2,60,000 in 2019 and Tk. 3,60,000 in each year thereafter. The profit margin on sales would be 30%, before taking account of depreciation. - Division C could invest Tk.1,60,000 in a new delivery vehicle, which would be depreciated at a rate of 40% per annum on a diminishing balance basis. Annual sales would increase by TK.1,20,000, and the profit margin on sales would be 25% before depreciation. An additional working capital investment of Tk. 40,000 would also be required. Required: a. For 2019, calculate each of the following: - The ROI for each division, and for Mavers Ltd. as a whole, assuming that the extra projects are not accepted. - The expected ROI for each of the three extra projects. b. Calculate the ROI of each extra project for 2019 . c. Explain 'whether each Divisional Manager is likely to accept his or her division's proposed extra project and what decision would be in the best interests of the company's shareholders in each case, insofar as is possible from the information available. (Indicate any reservations which you may have about the comprehensiveness of the information available)