ROI and Residual Income:Basic Computations Watkins Associated Industries is a highly diversified company with three divisions: Trucking, Seafood, and Construction. Assume that the company uses return on investment and residual income as two of the evaluation tools for division managers. The company has a minimum desired rate of return on investment of 10 percent with a 30 percent tax rate. Selected operating data for three divisions of the company follow.

	Trucking Division	Seafood Division	Construction Division
Sales	$1,000,000	$690,000	$900,000
Operating assets	500,000	230,000	380,000
Net operating income	99,000	58,000	57,000

(a) Compute the return on investment for each division. (Round answers to three decimal places.) Trucking ROI = Answer Seafood ROI = Answer Construction ROI = Answer (b) Compute the residual income for each division.

Residual Income	Trucking	Seafood	Construction
Net operating income	$Answer	$Answer	$Answer
Minimum level	Answer	Answer	Answer
Residual income	$Answer	$Answer	$Answer

(c) Which of the following is an appropriate statement about the performance of the three divisions:

Construction has the superior performance.

Residual income is always superior to ROI for assessing performance.

Seafood has the superior performance.

Trucking has the superior performance.

Which division has the superior performance depends on which performance evaluation metric is used to assess performance.