News Report Group has two major divisions: Print and Internet. Summary financial data for 2014 are as follows:

	Unit: $ million
Division	Operating Income	Revenue	Total Assets
Print Division	$4,500	$22,500	$25,000
Internet Division	$690	$23,000	$10,000

The two division managers annual bonuses are based on division ROI. If a division reports an increases in ROI from the previous year, its management is automatically eligible for a bonus. However, if a division reports a decline in ROI, the division manager has to present an explanation to the board of directors and is unlikely to get any bonus.

Carol Mays, manager of the Print Division, is considering a proposal to invest $2,580 million in a new printing system. It is estimated that the new system will increase 2015 division operating income by $360 million. News Report Groups required rate of return on investment is 10%.

Required)

Using DuPont method of profitability analysis, explain differences in 2014 ROI between the two divisions.

Why might Mays be less than enthusiastic about accepting the investment proposal for the new printing system despite her belief in the benefits of new technology?

John Mendenhall, CEO of News Report Group, is considering a proposal to base division executive compensation based on division residual income (RI).

Compute the 2014 RI for each division.

Would adoption of an RI measure duce Mays reluctance to adopt the new printing system investment proposal?