Mims Corporation recently announced a bonus plan to reward the manager of its most profitable division. The three divisional managers are to decide which performance measure will be used to evaluate profltabi1ity Mims Corporation requires a 10% minimum return on investment.

The following information is available for the year just ended.

Required

a. Based on return on investment, which division performed the best?

b. Based on residual income, which division performed the best?

c. Assume that Mims Corporation’s weighted-average cost of capital is 8% and its tax rate is 30%. Based on economic value added, which division performed the best?

d. What measure will each division manager select? What should the upper management of Mims Corporation do?

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Divisional Divisional Invested Division Operating Assets Operating Income Capital Ashton $900,000 $99,000 $200,000 Drye 820,000 94,300 75,000 Poole 480,000 57,600 120,000