Tech Information Group has two major divisions: print and Internet. Summary financial data (in millions) for 2019 and 2020 are as follows:
Requirements 1. Use the DuPont method of profitability analysis to explain differences in 2020 ROls between the two divisions. Use 2020 total assets as the investment base. 2. Why might Mays be less than enthusiastic about accepting the investment proposal for the new system, despite her belief in the benefits of the new technology? 3. Roan Moreno, CEO of Tech Information Group, is considering a proposal to base division executive compensation on division RI. a. Compute the 2020Rl of each division. b. Would adoption of an RI measure reduce Mays' reluctance to adopt the investment proposal for the new computerized system? 4. Moreno is concemed that the focus on annual ROl could have an adverse long-run effect on Tech Information Group's customers. What other measurements, if any, do you recommend that Moreno use? Explain briefly. More info The two division managers' annual bonuses are based on division ROI (defined as operating income divided by total assets). If a division reports an increase in ROI from the previous year, its management is automatically eligible for a bonus; however, the management of a division reporting a decline in ROI has to present an explanation to the Tech Information Group board and is unlikely to get any bonus. Data table Requirement 1. Use the DuPont method of profitability analysis to explain differences in 2020 ROIs between the two divisions. Use 2020 total assets as the investment base. Determine the formulas needed, then calculate the ROI for both divisions in 2020 . (Round all ratios to three decimal places, XXX.) Print Internet Use the DuPont method of profitability analysis. Select the choice that explains the differences in 2020 ROIs between the two divisions. A. The Print Division has a relatively high ROI because of its low income margin relative to Intemet. The Intemet Division has a low ROI despite a high investment turnover because of its very high income margin. B. The Print Division has a relatively low ROI because of its high income margin relative to Internet. The Intemet Division has a high ROI due to a high investment turnover because of its very low income margin. C. The Print Division has a relatively low ROI because of its low income margin relative to Intemet. The Internet Division has a high ROI despite a low investment turnover because of its high low income margin. D. The Print Division has a relatively high ROI because of its high income margin relative to Internet. The Intemet Division has a low ROI despite a high investment turnover because of its very low income margin. Requirement 2. Why might Mays be less than enthusiastic about accepting the investment proposal for the new system, despite her belief in the benefits of the new technology? (Round all ratios to three decimal places, XXX.) Begin by calculating the ROI of the investment proposal and the ROI of the print division including the investment proposal. The ROI of the investment proposal is and the ROI of the print division if the investment proposal is accepted is Requirement 2. Why might Mays be less than enthusiastic about accepting the investment proposal for the new system, despite her bel in the benefits of the new technology? (Round all ratios to three decimal places, X.) Begin by calculating the ROI of the investment proposal and the ROI of the print division including the investment proposal. The ROI of the investment proposal is and the ROt of the print division if the investment proposal is accepted is Why might Mays be less than enthusiastic about accepting the investment proposal? Requirement 3. Roan Moreno, CEO of Tech Information Group, is considering a proposal to base division executive compensation on division RI. a. Compute the 2020RI of each division. (Round your answers to the nearest whole dollar. Use parentheses or a minus sign for negative Rls.) Print Internet b. Would adoption of an RI measure reduce Mays' reluctance to adopt the investment proposal for the new computerized system? Begin by calculating the RI for the investment proposal. (Use parentheses or a minus sign for a negative RI.) The RI for the investment proposal is Investing in the fast-speed printing press will have the Print Division's residual income. Requirement 4, Moreno is concerned that the focus on annual ROI could have an adverse long-run effect on Tech Information Group's customers. What other measurements, if any, do you recommend that Moreno use? Explain briefly. Requirement 3. Roan Moreno, CEO of Tech Information Group, is considering a proposal to base division executive compensation on division RI. a. Compute the 2020R of each division. (Round your answers to the nearest whole dollar. Use parentheses or a minus sign for negative RIs.) Print Internet b. Would adoption of an RI measure reduce Mays' reluctance to adopt the investment proposal for the new computerized system? Begin by calculating the RI for the investment proposal. (Use parentheses or a minus sign for a negative RL.) The R1 for the investment proposal is Investing in the fast-speed printing press will have the Print Division's residual income. Requirement 4. Moreno is concerned that the focus on annual ROI could have an adverse long-run effect on Tech Information Group's customers. What other measurements, if any, do you recommend that Moreno use? Explain briefly. What on the focus on annual ROI could have an adverse long-run effect on Tech Information Group's sustomers. What other measurements, if any, do you recommend that Moreno use? Explain briefly. A. Moreno could consider using RI. The use of RI motivates managers to accept any project that makes a positive contribution to net income after the cost of the invested capital is taken into account. Making such investments will have a positive effect on Tech Information Group's customers. B. Moreno may want to consider nonfinancial measures such as newspaper subscription levels, intemet audience size, repeat purchase patterns, and market share. These measures will require managers to invest in areas that have favorable long-run effects on Tech Information Group's customers. C. Both A and B. D. None of the above. There are no further recommendations. Moreno should only focus on annual ROI
