Mega Kitchen Corp has two regional divisions in North America with headquarters in Orlando and Seattle. Selected data on the two divisions follow:

	Orlando	Seattle
Sales	$3,000,000	$ 9,000,000
Net Operating Income	210,000	720,000
Average Operating Assets	1,000,000	4,000,000

Required:

1. For each division, compute the return on investment (ROI).

2. Assume that the company evaluates performance using residual income and that the minimum required rate of return for any division is 15%. Compute the residual income for each division.

3. Assume that Orlando and Seattle divisions are competing against each other regarding ROI. Also assume that Seattle has an opportunity to acquire more equipment to enhance its operations. How likely is it that Seattle will agree to acquire this equipment?

4. Assume that Orlando and Seattle divisions are competing against each other regarding residual income. Also assume that each division has an opportunity to accept projects in their respective geographies that will earn a 16% ROI. Management in both divisions are concerned accepting the project will lower their ROI. Should the projects be accepted?