Question 1 (performance evaluation: RI, ROI) Generic Motors Corporation has two divisions, Kadillack and Chevrolay. Their performance for last year is as follows.

	Kadillack	Chevrolay
Investment (operating assets)	$600 million	$2,400 million
Profit	$108 million	$336 million

The required rate of return (cost of capital) for Generic Motors is 10% a year. Required: a) What is the return on investment (ROI) for each division? Kadillack ROI = ____ % (enter say 9.5% as 9.5, not as 0.095 and not as 9.5%) Chevrolay ROI = ____ %

Which division performs better, based on ROI? (1=Kadillack, 2=Chevrolay) ____ . b) What is the residual income (RI) for each division? Kadillack RI = $ _____ million (enter say $3.52 million as 3.52, not as 3,520,000) Chevrolay RI = $ _____ million Which division performs better, based on RI? (1=Kadillack, 2=Chevrolay) c) Which of the two measures (ROI or RI) would you use to decide which division performs better? Briefly explain your reasons. ________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ .