Selected sales and operating data for three divisions ofdifferent structural engineering firms are given as follows:
| Division A | Division B | Division C |
| Sales | $ | 12,440,000 | | $ | 35,550,000 | | $ | 25,550,000 | |
| Average operating assets | $ | 3,110,000 | | $ | 7,110,000 | | $ | 5,110,000 | |
| Net operating income | $ | 547,360 | | $ | 639,900 | | $ | 740,950 | |
| Minimum required rate of return | | 10.00 | % | | 10.50 | % | | 14.50 | % |
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Required:
1. Compute the return on investment (ROI) for each divisionusing the formula stated in terms of margin and turnover.
2. Compute the residual income (loss) for each division.
3. Assume that each division is presented with an investmentopportunity that would yield a 11% rate of return.
a. If performance is being measured by ROI, which division ordivisions will probably accept or reject the opportunity?
b. If performance is being measured by residual income, whichdivision or divisions will probably accept or reject theopportunity?
