Question 3 (10 marks) Patel Corporation is a Canadian company that manufactures electric components and has a very successful Division located in Eastern Canada. This Division is considered to be an investment center for purposes of managerial evaluation. Patel uses ROI as a performance measure in all its Divisions and management bonuses are based on ROI. All investments in operating assets are expected to earn a minimum retum of 14%. Patel's historical Rol has averaged a company wide ROI of 16.5% The most recent income statement for the Eastern Canadian Division is given below. The division's Average Operating Assets employed were $18,000,000. Eastern Canadian Division Divisional Income Statement For the Year Ended May 31, 2021 Sales Cost of goods sold Gross Margin $43,200,000 31,800,000 11,400,000 Less operating expenses: Selling expenses Administrative expenses Net operating income $5,700,000 1.920,000 7.620,000 $ 3.780.000 The Eastern Canadian Division is currently considering an investment opportunity that proposes the following amounts: The Easter Canadian Division is currently considering an investment opportunity that proposes the following amounts: Sales Operating Expenses Investment Required $4,000,000 $3,400,000 $3,500,000 Required: 1 Calculate the following performance measures as of May 31, 2021 for The Eastern Canadian Division (a) ROI (b) Residual income 2. Calculate the ROI on the Investment opportunity a Will the management of the Eastern Canadian Division accept the investment opportunity? b If residual income were used as a performance measure instead of ROI would the Eastern Canadian Division accept? Explain