[The following information applies to the questions displayed below.]

Megamart provides the following information on its two investment centers.

Investment Center	Sales	Income	Average Assets
Electronics	$ 40,800,000	$ 3,060,000	$ 17,000,000
Sporting goods	17,680,000	2,210,000	13,000,000

Exercise 9-10 (Algo) Computing return on investment and residual income; investing decision LO A1

1. Compute return on investment for each center. Using return on investment, which center is most efficient at using assets to generate income?
2. Assume a target income of 11% of average assets. Compute residual income for each center. Which center generated the most residual income?
3. Assume the Electronics center is presented with a new investment opportunity that will yield a 15% return on investment. Should the new investment opportunity be accepted? The target return is 11%.

Compute return on investment for each center. Using return on investment, which center is most efficient at using assets to generate income? \begin{tabular}{|l|l|l|l|l|} \hline & \multicolumn{9}{|c|}{ Return on Investment } \\ \hline & Numerator: & I Denominator: & & \\ \hline Electronics & I & & = & Return on Investment \\ \hline Sporting Goods & I & & = & \\ \hline \end{tabular} Assume a target income of 11% of average assets. Compute residual income for each center. Which center generated the most residual income