Stuart Corporation operates three investment centers. The following financial statements apply to the investment center named Bowman Division.

BOWMAN DIVISION
Income Statement
For the Year Ended December 31, Year 2
Sales revenue	$ 107,280
Cost of goods sold	59,775
Gross margin	47,505
Operating expenses
Selling expenses	(2,840)
Depreciation expense	(4,135)
Operating income	40,530
Nonoperating item
Loss on sale of land	(3,500)
Net income	$ 37,030

BOWMAN DIVISION
Balance Sheet
As of December 31, Year 2
Assets
Cash	$ 12,672
Accounts receivable	40,306
Merchandise inventory	36,300
Equipment less accumulated depreciation	90,408
Nonoperating assets	9,000
Total assets	$ 188,686
Liabilities
Accounts payable	$ 9,477
Notes payable	67,000
Stockholders equity
Common stock	76,000
Retained earnings	36,209
Total liabilities and stockholders' equity	$ 188,686

Required

c.Calculate the ROI for Bowman.

d.Stuart has a desired ROI of 11 percent. Headquarters has $87,000 of funds to assign to its investment centers. The manager of the Bowman Division has an opportunity to invest the funds at an ROI of 13 percent. The other two divisions have investment opportunities that yield only 12 percent. Calculate the new ROI for Bowman division, if the investment opportunity is adopted by Bowman.

e. Based on the original data, calculate the original residual income. Also, calculate the new residual income based on information provided in Requirement d.