Problem 10-18 (Algo) Return on Investment (ROI) and Residual Income [LO10-1, LO10-2] 4 know headquarters wants us to add that new product line," said Dell Havasi, manager of Billings Company's Office Products Division. "But I want to see the numbers before I make any move, Our division's return on investment (ROI) has led the company for three years. and I don't want any letdown: Billings Company is a decentralized wholesaler with five autonomous divisions. The divisions are evaluated on the basis of ROI, with year-end bonuses given to the divisional managers who have the highest ROls, Operating results for the company's Office Products Division for this year are given below: The company had an overall return on investment (ROI) of 18.00% this year (considering all divisions). Next year the Office Products Division has an opportunity to add a new product line that would require an additional investment that would increase average operating assets by $2,350,000. The cost and revenue characteristics of the new product line per year would be: Required: 1. Compute the Orfice Products Divistion's ROt for this year. 2. Compute the Office Products Dirslon's Rol for the new product ine by itselt 3. Compute the Office Products Division's ROI for next yerar assuming that it performs the some as this year and adds the new product line. 4. If you wete in Dell Hovivers position, would you secept of reject the new product line? 5 Why do you suppose heodquarters is anxious for the Oflice Products Oivisian to odd the new peoduct line? 6. Suppose that the company's minimum required rate of return on operating assets is t5\% and that performance is evaluated using residual income. a. Compute the Office Products Divilon's residual income for this year. b. Compute the Orfice Products Division's rensidual income for the new product line by itself. c. Compute the Office Products Division's residual income for next year assuming that it performs the same as this year and adds the new product line. d. Using the resldual income approach, if you wore in Dell Havasis poshtion, would you accept or ryoct the new product line? Complete this question by entering your answers in the tabs below. 1. Compute the Office Mroducts Division r hor for this year. 2. Compute the Office Products Divilon's poi for the new prod uct ine by itseit product ine. Why do you suppose headquarters is anxious for the Office Products Division to add the nev