Rundle Technologies, Inc. has three divisions. Rundle has a desired rate of return of 12.0 percent. The operating assets and income for each division are as follows:

Divisions	Operating Assets				Operating Income
Printer	$	660,000			$	107,580
Copier		930,000				100,440
Fax		480,000				65,760
Total	$	2,070,000			$	273,780

Rundle headquarters has $132,000 of additional cash to invest in one of its divisions. The division managers have identified investment opportunities that are expected to yield the following ROIs:

	Expected ROIs for
Divisions	Additional Investments
Printer	13.5	%
Copier	12.5	%
Fax	11.5	%

Required

1. a-1. Calculate the ROI for each division. a-2. Which division manager is currently producing the highest ROI?

2. b. Based on ROI, which division manager would be most eager to accept the $132,000 of investment funds?

3. c. Based on ROI, which division manager would be least likely to accept the $132,000 of investment funds?

4. d. Which division offers the best investment opportunity for Rundle?

5. g. Calculate the residual income:

1. (1) At the corporate (headquarters) level before the additional investment.

2. (2) At the division level before the additional investment.

3. (3) At the investment level.

4. (4) At the division level after the additional investment.

Requirement A1:

	ROI
Printer Division		%
Copier Division		%
Fax Division		%

A2-D

a-2.	Which division manager is currently producing the highest ROI?
b.	Based on ROI, which division manager would be most eager to accept the $132,000 of investment funds?
c.	Based on ROI, which division manager would be least likely to accept the $132,000 of investment funds?
d.	Which division offers the best investment opportunity for Rundle?

G1:

Residual Income:

G2-G4:

		Residual Income (loss)
(2)	Printer division
	Copier division
	Fax division
(3)	Printer division
	Copier division
	Fax division
(4)	Printer division
	Copier division
	Fax division