Located in Bartow, Alabama, the Pharmaceutical Division of Ameripill Company ranks among the top 15 drug companies in the world. The European Unit of the Pharmaceutical Division is divided into three markets: United Kingdom (U.K.), Germany, and France. Actual and budgeted operating reports for two recent years are presented below for these three markets.

1. Analyze these reports carefully. Assuming that Ameripill requires a minimum ROA of 12%, should the company consider dropping the U.K. market?
2. Ameripill currently has a problem with one of the drugs sold in France. In the French market, Saincoeur is a highly successful treatment for heart-attack victims. (It is also sold under other names in all of Ameripill's markets.) Because of regulatory pressure in France, Saincoeur is being sold at a much lower price in France than in Germany or the United Kingdom. Despite the price ceiling, Saincoeur is a profitable product (barely) in France. However, word of the lower price is creating a lot of pressure in the neighboring markets to reduce the prices to a level similar to that of the French market. Saincoeur is a very profitable product in both Germany and the United Kingdom. How do these facts affect your previous decision regarding the U.K. market in part(1)?

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United Kingdom Germany France Year 2 Budget Year 2 Year 1 Year 2 Year 1 Actual Year 1 Actual Budget Budget Actual $ 48,080 (21,155) (14,512) (1,155) $11,258 $ 49,960 (21,982) (14,658) (1,499) S 11,821 S108,720 (53,414) (31,529) (946) Sales Cost of sales $156,840 (65,872) (50,286) (300) 5 40,382 (1,312) S137,440 (57,995) (46,603) (210) $ 32,632 S102,560 (50.254) (29,742) (1,026) S 21,538 (1,047) Direct expenses Other income/expenses. Responsibility earnings Interest income/expense S 22,831 (1,033) (358) (241) (939) United Kingdom Germany France Year 2 Budget Year 2 Budget Year 1 Year 1 Year 2 Year 1 Actual Actual Budget Actual Exchange gain/loss** Division charges Earnings before taxes Segment assets S (142) (1,629) $ 9,692 $84,500 S (338) (1,640) $ 9,039 $88,860 S 150) (4,700) $ 34,220 S 73,760 (210) (272) (3,262) S 18,264 $ 74,220 (286) (4,123) $ 27,360 $ 72,900 (3,077) $ 17,128 $ 73,460 19.9% 16.8% 24.6% Earnings before taxes Return on assets. 19.4% 18.8% 21.8% 16.7% 11.5% 10.2% 46.4% 37.5% 23.3% *Based on locally incurred debt. **Based on the average Year 1 exchange rate with the United States. ***Fixed charge negotiated annually between the Bartow Division and the market subsidiary.