Noonan Division has total assets (net of accumulated depreciation) of $3,000,000 at the beginning of year 1. In addition, Noonan has been leasing a machine for $60,000 annually. Expected divisional income in year 1 is $495,000 including $42,000 annually in income generated by the leased machine after the lease payment of $60,000. Noonan's cost of capital is 12 percent. Noonan can cancel the lease on the machine without penalty at any time.

Required:

(a)

Noonan computes ROI using beginning-of-the-year net assets. What will the divisional ROI be for year 1 assuming Noonan does not cancel the lease on the machine?

(b)

What would divisional ROI be for year 1 assuming Noonan cancels the lease on the machine?

(c)

Noonan computes residual income using beginning-of-the-year net assets. What will the divisional residual income be for year 1 assuming Noonan does not cancel the lease on the machine?

(d)	What would divisional residual income be for year 1 assuming Noonan cancels the lease on the machine?