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

	Fruit Division	Flower Division
Sales revenue	$ 1,320,000	$ 1,980,000
Cost of goods sold and operating expenses	990,000	1,485,000
Net operating income	$ 330,000	$ 495,000
Average invested assets	$ 5,000,000	$ 1,980,000

Orange has established a hurdle rate of 5 percent.

Required:

1-a. Compute each divisions return on investment (ROI) and residual income for last year.

1-b. Determine which manager seems to be performing better.

2. Suppose Orange is investing in new technology that will increase each divisions operating income by $142,000. The total investment required is $2,100,000, which will be split evenly between the two divisions. Calculate the ROI and residual income for each division after the investment is made.

3. Determine whether both managers will support the investment.