Sanderson Inc is a divisionalised company. Among its divisions are Division A and Division B which operate in different industries. The following data relates to the year ended 31 May 2020: Income statement information Div A Div B R 0.00s R0.00s Sales 726576 414400 Gain on sale plant 0 15984 726576 430384 Direct labour 142400 127200 Direct material 409600 163200 Research and training costs 11200 17600 Divisional overheads 84800 72800 Interest expense 8000 3200 656000 384000 Net profit before tax 70576 46384 Statement of financial position information Div A Div B R 0.00s R 0.00s Fixed asset ( at cost less accumulated depreciation) 122000 144000 Inventory 101600 28800 Trade debtors 64000 33600 Cash at bank 24000 17000 Total Asset 311600 223400 Equity and long term Liabilities Equity 173600 124200 Long term Liabilities 80000 52800 Current Liabilities Short term portion of long term loan 10000 12000 Account Payable 48000 34400 Total Equity and Liabilities 311600 223400 The basis for appraising divisional manager performance is currently under review. At present there is disagreement as to whether return on investment, residual income or EVA is the better measure. The company regards research and training costs to be an investment in the medium term (5 years) future of the company. Under EVA the discretionary expenditure will be capitalised and amortised over this period. For the sake of simplicity assume that discretionary expenditure is incurred at the beginning of the year. The cost of capital of the company is 13% per annum. Required 2.1 Calculate for both divisions the following three measures: return on investment (ROI), Residual Income & EVA. 2.2 State the advantages and disadvantages of Return on investment (ROI) and Residual Income