The way divisional performance is evaluated and rewarded at the Bates company is currently under review. Central to the company's current competitive strategy is product innovation and a strong market share for its main products in the tennis ball industry. Relevant information for the company's operating divisions for the year just ended is What triggered the review is the imminent loss to a rival company of one of the dedicated divisional managers. They were appointed divisional manager two years ago to redress the finances of a failing division (A Division). After years of losses, the division managed to breakeven last year and has since continued the substantial progress. Under pressure from shareholders, central management desperately want each division to achieve at least a 15% after-tax retum on investment (ROI) target this year. The division managers have expressed dissatisfaction with this fixation on short-term performance measurement which in their view does not encourage entrepreneurship and runs against the company's competitive strategy. Required: a) Assuming a tax rate of 30\%, calculate the company's version of ROI for each division for the year. With support from any other calculations you consider useful, discuss divisional performance at the Bates company. (11 marks) b) Using a weighted average cost of capital of 13%, calculate and discuss the residual income figure for each division, stating any limitations of your results. ( 7 marks) c) Given the company is now at risk of losing more staff, explain why the switch to a performance management model is the way forward. (7 marks)