Selected Sales and operating data for the three divisions of King Company are as given:

DIV A DIV B DIV C

Sales 24,000,000 40,000,000 32,000,000

Avg. Oper. Assets 6,000,000 20,000,000 8,000,000

Net Oper. Income 1,200,000 3,600,000 720,000

Min. Req'd rate of return 15% 18% 12%

1. Compute the ROI for each division
2. Compute the residual income for each division
3. Assume that each division is presented with an investment opportunity that would yield a rate of return of 17%.

a. If performance is measured by ROI, which division(s) will

probably accept, which division(s) will reject, and why?

b. If performance is measured by residual income, which

division(s) will probably accept, which division(s) will

reject, and why?