Problem 15-23 Comparing return on investment and residual income Helena Corporation operates three investment centers. The following financial statements apply to the investment center named Bowman Division. BOWMAN DIVISION Income Statement For the Year Ended December 31,2018 138,000 78,000 60,000 Sales revenue Cost of goods sold Gross margin Operating expenses Selling expenses Depreciation expense (6,000) 8.000) 46,000 Operating income Nonoperating item Loss on sale of land Net income (16,000) 30,000 BOWMAN DIVISION Balance Sheet As of December 31, 2018 Assets Cash Accounts receivable Merchandise inventory Equipment less accum. dep. Nonoperating assets $ 18,898 42,266 37,578 90,258 9,000 $198,000 Total assets Liabilities Accounts payable Notes payable $ 9,637 72,000 Stockholders' equity Common stock Retained earnings 80,000 Total liab. and stk. equity 198,000 Required a. Which should be used to determine the rate of return (ROI) for the Bowman investment center, operating income or net b. Which should be used to determine the ROI for the Bowman investment center, operating assets or total assets? c. Calculate the ROI for Bowman. Round the computation to two decimal points income? Explain your answer. Explain your answer Helena has a desired ROI of 10 percent. Headquarters has $96,000 of funds to assign to its investment centers. The manager of the Bowman Division has an opportunity to invest the funds at an ROI of 12 percent. The other two divisions have investment opportunities that yield only 11 percent. Even so, the manager of Bowman rejects the additional funding. Explain why the manager of Bowman would reject the funds under these circumstances. Round the computation to two decimal points. Explain how residual income could be used to encourage the manager to accept the additional funds. Round the computation to whole dollars. d. e