Star Mart PH is organized into business units based on their products and services and has four operating segments as follows:

• Mall
• Residential
• Commercial
• Hotels and Convention

Management through the executive committee monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance assessment. Segment performance is evaluated based on operating profit or loss and is measured consistently with the operating profit or loss in the consolidated financial statement

Transfer prices between business segments are set on an arm's length basis similar transactions with non related parties. Such transfers are eliminated in the consolidated financial statements

Shown below is the business segment data of SMPH

Based on the above information compute the following:

1. Compute the Return on investment (ROI) of each of the business segments.
2. Compute the Residual Income.
3. Assume that SMPH required a minimum required rate of return of 12%, 20%, 10% and 7% for the mall, residential, commercial and hotel and convention respectively and a business opportunity that would yield a return of 15% is presented to each business unit
   1. If performance is measured by ROI which division or divisions will likely accept the opportunity? reject? why?
   2. If performance is measured by residual income which division will likely accept the opportunity? reject? why?

   3. For the first half of 2020, SMPH posted net income of P10.4B, down by 46% caused by COVID19. Among the four business segments of SMPH which one do you think is the most affected and why? Likewise, moving forward, which segment do you think is going to recover first from the unprecedented effects of COVID19 and why?

Shown below is the business segment data of SMPH Mal Residential 2019 Hotels and Convention Consolidated Commercial Centers Eliminations Balances (In Thousands) P4,510,820 P5,046,618 P118,311,490 74,100 (172.834) P4,584.920 PS,060,280 P172,814 P118311490 Revenue External customers Inter-segment P45,213,765 P63.540,287 85,072 P63.625.359 P45,213.765 P15,020,332 (P1,013,063) P30,418,637 (7,020,90 P23-297-704 P3,661,683 (658.358) P2.001.125 P1,074,405 (265,768) PRON 617 P49,161,994 (10.373,321). P38 788 673 P12.592.070 P1.013.063) Segment result Income before income tax Provision for income tax Net income Net income attributable to Equity holders of the Parent Non-controlling interests Seement assets P22,701,115 696,589 P12,585,587 6,483 P3,003,325 P808,637 (P1,013,063) P38,085,601 703,072 (P4,076,117) P667,279,674 P388,653,151 P217,788,016 P51,340,770 P13,573,854 Sarment liabilities P217486. 162 P124 277.571 PS.982.687 P1,092,597 (P4,076 117 164,761,400 Other information: Capital expenditures Depreciation and amortization P29,283,828 9,514,073 P27,578,564 141418 P10,216,823 560,854 P1,618,631 606 713 P68,697,846 10,825,078 Shown below is the business segment data of SMPH Mal Residential 2019 Hotels and Convention Consolidated Commercial Centers Eliminations Balances (In Thousands) P4,510,820 P5,046,618 P118,311,490 74,100 (172.834) P4,584.920 PS,060,280 P172,814 P118311490 Revenue External customers Inter-segment P45,213,765 P63.540,287 85,072 P63.625.359 P45,213.765 P15,020,332 (P1,013,063) P30,418,637 (7,020,90 P23-297-704 P3,661,683 (658.358) P2.001.125 P1,074,405 (265,768) PRON 617 P49,161,994 (10.373,321). P38 788 673 P12.592.070 P1.013.063) Segment result Income before income tax Provision for income tax Net income Net income attributable to Equity holders of the Parent Non-controlling interests Seement assets P22,701,115 696,589 P12,585,587 6,483 P3,003,325 P808,637 (P1,013,063) P38,085,601 703,072 (P4,076,117) P667,279,674 P388,653,151 P217,788,016 P51,340,770 P13,573,854 Sarment liabilities P217486. 162 P124 277.571 PS.982.687 P1,092,597 (P4,076 117 164,761,400 Other information: Capital expenditures Depreciation and amortization P29,283,828 9,514,073 P27,578,564 141418 P10,216,823 560,854 P1,618,631 606 713 P68,697,846 10,825,078