'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 ROI. Last year, the company as a whole produced a 14 percent return on its investment.

During the past week, management of the companys Western 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 Western Division and the competitor:

	Western Division			Competitor
Sales	$	4,330,000		$	2,730,000
Variable costs		70	% of sales		60	% of sales
Fixed costs	$	1,101,000		$	996,000
Invested capital	$	990,000		$	400,000

Management has determined that in order to upgrade the competitor to Megatronics standards, an additional $240,000 of invested capital would be needed.

Required:

1.

Compute the current ROI of the Western Division and the divisions ROI if the competitor is acquired. (Round your "Percentage" answer to 2 decimal places (i.e., .1234 should be entered as 12.34).)

Current ROI	20.00	%
ROI if competitor is acquired		%

5-a.

Assume that Megatronics uses residual income to evaluate performance and desires a 10 percent minimum return on invested capital. Compute the current residual income of the Western Division and the divisions residual income if the competitor is acquired.

Current residual income
Residual income if competitor is acquired