Question 2 Dragon Plc produces a range of specially designed thermal insulation sheets for domestic, commercial, and industrial use. Due to the different markets that they operate in they have divisional into three autonomous departments, Domestic, Commercial and Industrial. They have just reported their results for the year ended 30th November 2023, which are shown below. (All figures in '000) Domestic Commercial Industrial Division Sales Gross Profit Operating Profit Net Profit Capital Employed 4,200 2,520 1,350 950 3,500 2,800 1,820 1,100 900 1,700 2,200 1,100 650 550 2,000 Required: a) For each division and company calculate i. The Return on Capital Employed ii. The Gross Profit Margin iii. The Operating Profit Margin iv. Net Profit Margin V. The Asset Turnover Rate Total The company rewards divisional managers based on the Return on Capital Employed and has a Cost of Capital of 15%. You may assume that the company does not pay corporation tax. I 9,200 5,440 3,100 2,400 7,200 (10 marks) b) Utilising the calculations in (a) comment on the profitability of each of the divisions and identify potential reasons why their results may differ. (4 marks - maximum 200 words) c) It has been put forward that the domestic division should expand its product range New Investment would cost 900,000 and generate an additional 240,000 in profit. As the manager of the Domestic Division would you recommend that this opportunity be invested in? (2 marks) d) Utilising the calculations in part (c) critically appraise the use of Return on Capital Employed as a measure of Divisional Manager performance. (3 marks- maximum 150 words) e) Using the Company's Cost of Capital of 14%, calculate the Residual income of each division, the overall company and the additional investment described in part (C). (3 marks) f) Utilising your calculations in part (e) explain why Residual income may be a superior measure of a Divisional Manager's performance. (4 marks - maximum 200 words) g) Discuss other non-financial performance measures you feel the company should adopt and justify your choice.