Megatronics Corporation, a massive retailer of electronic products, is organized in four separate divisions. The four divisional managers are evaluated at year-end, and bonuses are awarded based on ROL Last year, the company as a whole produced a 15 percent return on its investment During the past week, management of the company's Northeast Division was approached about the possibility of buying a competitor that had decided to redirect its retail activities. If the competitor is acquired, it will be acquired at its book value.) The data that follow relate to recent performance of the Northeast Division and the competitor Northeast Division Competitor Sales $4,320,00 $2,728,00 Variable costs 75% of sales 7 of sales Fixed costs $70,000 Invested capital $ 300,000 Management has determined that in order to upgrade the competitor to Megatronics' standards, an additional $180.000 of invested capital would be needed Required: 1. Compute the current ROI of the Northeast Division and the division's ROI if the competitor is acquired. 2. If divisional management is being evaluated on the basis of ROI, will the Northeast Division likely pursue acquisition of the competitor? 3-a. Compute the ROI of the competitor as it is now and after the intended upgrade 3-5. I ROI is used as the basis for evaluation. would Megatronics Corporation likely be in favor of the acquisition of the competitor? 4. Calculate the Northeast Division's ROI after acquisition of competitor but before upgrading 5-9. Assume that Megatronics uses residual income to evaluate performance and desires a 12 percent minimum return on invested Capital Compute the current residual income of the Northeast Division and the division's residual income if the competitor is acquired s-b. If divisionel management is being evaluated on the basis of residual income, will the Northeast Division Rey pursue acquisition of the competitor? Answer is not complete. Complete this question by entering your answers in the tabs below. Rag Res 2 Red 3A Reg38 Reg4 Re SA Rese Compute the current Rol of the Northeast Division and the division's ROI if the competitor is acquired. (Round your answers to 2 decimal places de 1234 should be entered as 12.34).) Current ROI ROLcompetitors 24.00 Req2 Complete this question by entering your answers in the tabs below. Reg 58 Reg 1 Reg2 Reg 3 Reg 38 Reg 4 Reg SA Compute the ROI of the competitor as it is now and after the intended upgrade. ROI before upgrading ROI after upgrading Assume that Megatronics uses residual income to evaluate performance and desires a 12 percent minimum return on invested capital. Compute the current residual income of the Northeast Division and the division's residual income if the competitor is acquired. Current residual income Residual income if competitor is acquired
