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Problem 11-27 ROIvs.Residual IncomeUsing Different Asset Measures

Top management is trying to determine a consistent, but fair, valuation system to use to evaluate each of its four divisions. This year's performance data are summarized as follows:

Required:

Note: Only one division is awarded a bonus each year.

A. Which division would earn a bonus if top management used ROI based onoperating assets? SelectDivision 1Division 2Division 3Division 4Item 1

B. Which division would earn a bonus if top management used ROI based on operating assets minus current liabilities? SelectDivision 1Division 2Division 3Division 4Item 2

C. Which division would earn a bonus if top management calculated residual income on the basis of operating assets with a minimum return of 12 percent? SelectDivision 1Division 2Division 3Division 4Item 3

D. Which division would earn a bonus if top management calculated residual income on the basis of operating assets minus current liabilities with a minimum return of 12 percent? SelectDivision 1Division 2Division 3Division 4Item 4