Megatronics Corporation, a massive retailer of electronic products, is organized in four separate divisions. The...
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Megatronics Corporation, a massive retailer of electronic products, is organized in four separate divisions. The four divisional managers are evaluated at year-end, and bonuses are awarded based on ROl. Last year, the company as a whole produced a 15 percent return on its investment. During the past week, management of the company's Northeast Division was approached about the possibility of buying a competitor that had decided to redirect its retail activities. (If the competitor is acquired, it will be acquired at its book value.) The data that follow relate to recent performance of the Northeast Division and the competitor: Northeast Division $4,420,000 Competitor Sales Variable costs Fixed costs Invested capital $2,790,000 75% of sales 70% of sales $ 883,000 $ 925,000 $ 753,000 $ 300,000 Management has determined that in order to upgrade the competitor to Megatronics' standards, an additional $120,000 of invested capital would be needed
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