Orange Corp. has two divisions: Fruit and Flower. The following information for the past year is available for each division:

	Fruit Division			Flower Division
Sales revenue	$	960,000		$	1,440,000
Cost of goods sold and operating expenses		720,000			1,080,000
Net operating income	$	240,000		$	360,000
Average invested assets	$	2,000,000		$	2,000,000

Orange has established a hurdle rate of 7 percent. Required: 1-a. Compute each divisions return on investment (ROI) and residual income for last year. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.)) 1-b. Determine which manager seems to be performing better.

	Flower Division
	Fruit Division

2. Suppose Orange is investing in new technology that will increase each divisions operating income by $130,000. The total investment required is $2,000,000, which will be split evenly between the two divisions. Calculate the ROI and return on investment for each division after the investment is made. (Enter your ROI answers as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%.)) 3. Which manager will accept the investment.

Hints