News Report Group has two major divisions: Print and Internet. Summary financial data (in millions) for 2016 and 2017 are as follows: (Click the icon to view the data.) (Click the icon to view the division managers' annual bonus information.) (Click the icon to view the investment proposal Information.) Read the requirements. Requirement 1. Use the DuPont method of profitability analysis to explain differences in 2017 ROIs between the two divisions. Use 2017 total assets as the investment base. Determine the formulas needed, then calculate the ROI for both divisions in 2017. (Round all ratios to three decimal places, X.XXX.) ROI = * More Info Print Internet The two division managers' annual bonuses are based on division ROI (defined as operating income divided by total assets). If a division reports an increase in ROI from the previous year, its management is automatically eligible for a bonus; however, the management of a division reporting a decline in ROI has to present an explanation to the News Report Group board and is unlikely to get any bonus. i Data Table i Requirements Revenues Total Assets Operating Income 2016 2017 $ 3,720 $ 4,000 530 700 2016 2017 $ 18,200 $ 20,000 25,900 28,000 Print Internet 2016 2017 $ 18,450 $ 25,000 11,450 12,500 1. 2. 0 More Info 3. Use the DuPont method of profitability analysis to explain differences in 2017 ROIS between the two divisions. Use 2017 total assets as the investment base, Why might Mays be less than enthusiastic about accepting the investment proposal for the new system, despite her belief in the benefits of the new technology? Hunter Kaeding, CEO of News Report Group, is considering a proposal to base division executive compensation on division RI. a. Compute the 2017 RI of each division. b. Would adoption of an RI measure reduce Mays's reluctance to adopt the new computerized system investment proposal? Kaeding is concerned that the focus on annual ROI could have an adverse long-run effect on News Report Group's customers. What other measurements, if any, do you recommend that Kaeding use? Explain briefly. Carol Mays, manager of the Print division, is considering a proposal to invest $840 million in a new computerized news reporting and printing system. It is estimated that the new system's state-of-the-art graphics and ability to quickly incorporate late-breaking news into papers will increase 2018 division operating income by $114 million. News Report Group uses a 10% required rate of return on investment for each division. 4
