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 $ 1,620,000 $ 2,430,000

Cost of goods sold and operating expenses 1,134,000 1,822,500

Net operating income $ 486,000 $ 607,500

Average invested assets $ 4,050,000 $ 2,430,000

Orange has established a hurdle rate of 10 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.

Fruit Division

Flower Division

2. Suppose Orange is investing in new technology that will increase each divisions operating income by $127,000. 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.