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Question 3 (10 marks) L Patel Corporation is a Canadan company that manufactures electric components and has a very successfu Division located in Eastern Canada. This Division is considered to be an investment center for purposes of managerial evaluation Patel ufles Rol as a performance measure in all its Divisions and management bonuses are based on ROI. All investments in operating assets are expected to earn a minimum return of 14%. Patel's historical ROI has averaged a company wide ROI of 16.5% The most recent income statement for the Eastern Canadian Dision is given below The division's Average Operating Assets employed were $18,000,000 Eastern Canadian Division Divisional Income Statement For the Year Ended May 31, 2021 Sales $43,200,000 Cost of goods sold 31 800,000 Gross Margin 11,400,000 Less operating expenses Selling expenses Administrative expenses Net operating income $5,700,000 1920 000 7,620,000 $ 3.780,000 The Eastern Canadian Division is currently considering an investment opportunity that proposes the following amounts: Sales Operating Expenses Investment Required $4,000,000 $3,400,000 $3,500,000 Required: 1 Calculate the folowing performance measures as of May 31, 2021 for The Eastern Canadian Division (a) ROI (b) Residual income 2 Calculate the ROI on the Investment opportunity a Will the management of the Eastern Canadian Division accept the investment opportunity? b. If residual income were used as a performance measure instead of ROL would the Eastern Canadian Division accept? Explain. :9.4 : 15 :|| :1/1445