The board of Polygon Pty Ltd has advised the manager of its retail division to consider acquiring a competitor for improving the company's retail market share. Polygon Pty Ltd has always used return on investment (ROI) for evaluating the performance of its divisions; the manager of any division that reports an annual increase in their ROI is given a bonus, but the managers of divisions where the ROI declines must provide a very convincing explanation as to why they should get a bonus. Where ROI has declined, the bonus is limited to only 50 per cent of the bonus that is paid to the divisions that report an increase in ROI. Some managers are petitioning to the board of Polygon Pty Ltd for changing the divisions' performance evaluation from ROI to a residual income (RI), using the company's required annual rate of return of 12 percent. The following data relate to the most recent financial year: Retail Division (Polygon Pty Ltd) Competitor Total assets $10,000,000 $6,000,000 Total liabilities $8,000,000 $3,000,000 Sales revenue $12,000,000 $4,000,000 Less Variable expense $8,000,000 $2,000,000 Fixed expense $2,000,000 $1,000,000 Operating profit $2,000,000 $1,000,000