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Use the following information to answer the next TWO (2) questions. The Justice Division is one of the three autonomous divisions of Big Brands, Inc.

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Use the following information to answer the next TWO (2) questions. The Justice Division is one of the three autonomous divisions of Big Brands, Inc. The Justice division has $12,750,000 of capital invested in operating assets, and is currently earning a $3,250,000 operating income annually. A new investment has been proposed to the Justice Division. It will require $4,000,000 of capital in operating assets and will generate $840,000 operating income annually. Big Brands, Inc. requires all its divisions to earn a minimum return of 15% for all investments 1. What is the Return on Investment (RON) of Justice Division if it accepts the new investment (t.e., Division's ROI AETER the new investment)? (Round to 4 decimal places, XX.XX%) 15% 21% 24.42% 25.49% 32.08% 2. What is the Residual Income (R) of Justice Division if it accepts the new investment (f.e., Divistion's RI AFTER the new investment? $6,602,500 $240,000 $2,177,500 O $1,337,500 OS1,577,500 Use the following information to answer the next TWO (2) questions. Selected performance data for three divisions of Dory Company are given as follows: Division A Division B Division Current Retum on Investment (ROI) 15.6% 13.6% 9.6% Current Residual Income (RI) $215,000 50 S-1,010,000 Minimum required rate of return 10.6% 13.6% Each division is presented with an investment opportunity that would yield a 11.6% rate of return, 1. If performance is being measured by Return on Investment (ROI), what would be the decision to accept or reject the opportunity by each Division? Division A: Accept: Division B: Accept; Division C. Accept Division A: Reject; Division B: Accept; Division C: Accept Division A: Reject; Division B: Reject; Division C: Accept Division A: Accept; Division B: Reject; Division C: Accept O Division A: Accept: Division B: Accept; Division C. Accept 2. If performance is being measured by Residual Income (RI) what would be the decision to accept or reject the opportunity by cach division? Division A: Accept; Division B: Reject; Division C: Accept Division A: Accept: Division B: Reject; Division C: Accept Division A Reject; Division B: Accept: Division C: Accept O Division A: Accept, Division B: Accept; Division C. Accept Division A: Reject; Division B: Reject: Division C. Accept

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