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 15 percent return on its investment. During the past week, management of the company's 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: Competitor $2,690,000 Western Division Sales $4,400,000 Variable costs Fixed costs $ 913,000 Invested capital $ 850,000 75% of 70% of Psales sales $ 755,000 $ 200,000 Management has determined that in order to upgrade the competitor to Megatronics standards, an additional $125,000 of invested capital would be needed. Problem 13-40 Part 5 5-a. 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 Western Division and the division's residual income if the competitor is acquired. Current residual income Residual income if competitor is acquired