Rundle Corporation operates three investment centers. The following financial statements apply to the investment center named Bowman Division.

BOWMAN DIVISIONIncome StatementFor the Year Ended December 31, Year 2

Sales revenue $106,080

Cost of goods sold 58,275

Gross margins 47,805

Operating expenses

Selling expenses (2,760)

Depreciation expense (4,035)

Operating income 41,010

Nonoperating item

Loss on sale of land (4,000)

Net income $37,010

BOWMAN DIVISION
Balance Sheet
As of December 31, Year 2
Assets
Cash	$	12,652
Accounts receivable		40,416
Merchandise inventory		36,300
Equipment less accumulated depreciation		90,428
Nonoperating assets		10,100
Total assets	$	189,896
Liabilities
Accounts payable	$	9,547
Notes payable		65,000
Stockholders equity
Common stock		79,000
Retained earnings		36,349
Total liabilities and stockholder's equity	$	189,896

1. Calculate the ROI for Bowman.

2. Rundle has a desired ROI of 11 percent. Headquarters has $93,000 of funds to assign to its investment centers. The manager of the Bowman Division has an opportunity to invest the funds at an ROI of 13 percent. The other two divisions have investment opportunities that yield only 12 percent. Calculate the new ROI for Bowman division, if the investment opportunity is adopted by Bowman.

3. Based on the original data, calculate the original residual income. Also, calculate the new residual income based on information provided in Requirement d.