Selected sales and operating data for three divisions of different structural engineering firms are given as follows:

ABC

Sales12,000,00014,000,00025,000,000

Average Operating assets3,000,0007,000,0005,000,000

Net Operating Income600,000560,000800,000

Minimum Required rate of return14%10%16%

(required)

1.Compute the margin, turnover and return on investment (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 15% rate of return

a.If performance is being measured by ROI, which division or divisions will probably accept the opportunity? Reject? Why?

b.If performance is being measured by residual income, which division or divisions will probably accept the opportunity? Rejected? Why?