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Kyler Ceramics, a division of Fielding Corporation, has an operating income of $63,000 and total assets of $420,000. The required rate of return for the company is 10%. The company is evaluating whether it should use return on investment (ROI) or residual income (RI) as a measurement of performance for its division managers. The manager of Kyler Ceramics has the opportunity to undertake a new project that will require an investment of $140,000. This investment would earn $18,200 for the company. Read the requirements. Requirement 1. What is the original return on investment (ROI) for Kyler Ceramics (before making any additional investment)? First determine the formula to calculate the ROI. Operating income Total assets ROI (Enter the percentage to two decimal places.) The original return on investment (ROI) for Kyler Ceramics is 15 %. Requirement 2. What would the ROI be for Kyler Ceramics if this investment opportunity were undertaken? Would the manager of the Kyler Ceramics division want to make this investment if she were evaluated based on ROI? Why or why not? (Enter the percentage to two decimal places.) If this investment opportunity were undertaken, the ROI would be 14.5 % If the manager of this division is evaluated based on ROI she would not want to make this investment. Investing in the new project would decrease the division's ROI. Requirement 3 What is the ROL of the investment oportunity 2 Would the investment be desirable from the 1. What is the original return on investment (ROI) for Kyler Ceramics (before making any additional investment)? 2. What would the ROI be for Kyler Ceramics if this investment opportunity were undertaken? Would the manager of the Kyler Ceramics division want to make this investment if she were evaluated based on ROI? Why or why not? 3. What is the ROI of the investment opportunity? Would the investment be desirable from the standpoint of Fielding Corporation? Why or why not? 4. What would the residual income (RI) be for Kyler Ceramics if this investment opportunity were to be undertaken? Would the manager of the Kyler Ceramics division want to make this investment if she were evaluated based on RI? Why or why not? 5. What is the Rl of the investment opportunity? Would the investment be desirable from the standpoint of Fielding Corporation? Why or why not

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