The following information relates to the operating performance of two divisions of McClatchen Corporation, a newspaper publisher, for last year.

a. Compute the return on investment (ROI) of each division, using total assets stated at acquisition cost as the investment base.
b. Compute the ROI of each division, using total assets based on current replacement cost as the investment base.
c. Which of the two measures do you think gives the better indication of operating performance? Explain yourreasoning.

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Toronto Division Operating Profit. Total Assets (based on acquisition cost) Total Assets (based on current replacement costs). 800,000 4,000,000 6,000,000 Phoemix Division $1,200,000 7,500,000 8,000,000