Problem 13-40 ROl and Residual Income; Investment Evaluation (LO 13-2, 13-3, 13-4,13-8) [The following information applies to the questions displayed below.] Megatronics Corporation, a massive retailer of electronic products, is organized in four separate divisions. The four divisional managers are evaluated at year-end, and bonuses are awarded based on ROl. Last year, the company as a whole produced a 13 percent return on its investment. During the past week, management of the company's Western Division was approached about the possibility of buying a competitor that had decided to redirect its retail activities. (If the competitor is acquired, it will be acquired at its book value.) The data that follow relate to recent performance of the Western Division and the competitor: Western Division Competitor $4,260,000 70 Fixed costs 1,087,000 Invested capital 955,000 $2,660,000 65 $ 859,000 $ 300,000 Sales %of sales Variable costs sales Management has determined that in order to upgrade the competitor to Megatronics' standards, an additional $180,000 of invested capital would be needed 4. Calculate the Western Division's ROl after acquisition of competitor but before upgrading. (Round your "Percentage" answer to 2 decimal places (i.e., 1234 should be entered as 12.34).) ROI 5-a. Assume that Megatronics uses residual income to evaluate performance and desires a 12 percent minimum return on invested capital. Compute the current residual income of the Western Division and the division's residual income if the competitor is acquired. Current residual income Residual income if competitor is acquired 5-b. If divisional management is being evaluated on the basis of residual income, will the Western Division likely pursue acquisition of the competitor? O Yes O No