Question 3 HOME Ld is a multi-national corporation with divisionalized structure. Two of its divisions in Malaysia, Division XO and Division BA are managed by separate divisional manager with divisional autonomy given to them to make good investment decisions for the benefit of their own divisional performance and for the benefit of the group. Each division has its own cost and revenuc streams. The cost of capital is estimated at 8% for both divisions. Traditionally, all investment decisions have been made by calculating the divisional retum on investment (ROI) and at present, the ROI of each division is 13%. ROI is calculated using the formula of net profit over the average capital investment value. A new divisional manager, Ms. Tina was recently appointed in Division BA and has voiced-out that using residual income (RI) measure to make investment decisions would result in "better goal congruence" throughout the whole company. Each division is considering the following scparate investment proposals: ACC4245/F) Augas 2022 Page 5 of 8 Note: The above operating expenses excludes depreciation charges, staff training costs and social responsibility costs for both divisions. The company wishes to maximize their shareholders" wealth. Required: a) Evaluate and comment on the above imvestment proposal using the return on investment (ROI) and residual income (RI) for each of the two divisions separately, taking into consideration the new manager Ms. Tina's view about residual income. (20 marks) b) Discuss THREE (3) disadvantages of using ROI as a performance measure