The Singer Division of Patio Enterprises currently earns $2.85 million and has divisional assets of...
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The Singer Division of Patio Enterprises currently earns $2.85 million and has divisional assets of $19.0 million. The division manager is considering the acquisition of a new asset that will add to profit. The investment has a cost of $3,399,000 and will have a yearly cash flow of $846,000. The asset will be depreciated using the straight-line method over a six-year life and is expected to have no salvage value. Divisional performance is measured using ROI with beginning-of-year net book values in the denominator. The company's cost of capital is 14 percent. Ignore taxes. Required: a. What is the divisional ROI before acquisition of the new asset? (Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).) ROI before acquisition b. What is the divisional ROI in the first year after acquisition of the new asset? (Enter your answer as a percentage rounded to 1 decimal place (i.e., 32.1).) ROI after acquisition
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