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

Required:

Compute the return on investment $($ROI$)$ for each division using the formula stated in terms of margin and turnover.

Compute the residual income $($loss$)$ for each division.

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 or reject the opportunity?

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

Complete this question by entering your answers in the tabs below.

Req $1$

Req $2$

Req $3$B

Compute the return on investment $($ROI$)$ for each division using the formula stated in terms of margin and turnover. $($Do not

round intermediate calculations. Round your answers to $1$ decimal place.$)$Exercise $10-12($Algo$)$ Evaluating New Investments Using Return on Investment $($ROI$)$ and Residual Income $[$LO$10-1,$ LO$10-2]$

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

Division A Division B Division C

Sales $ $12,060,000$ $ $14,070,000$ $ $25,125,000$

Average operating assets $ $3,015,000$ $ $7,035,000$ $ $5,025,000$

Net operating income $ $603,000$ $ $562,800$ $ $804,000$

Minimum required rate of return $14\%10\%16\%$

Required:

$1.$ Compute the return on investment $($ROI$)$ for each division using the formula stated in terms of margin and turnover.

$2.$ Compute the residual income $($loss$)$ 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 or reject the opportunity?

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