World Report Group has two major divisions: Print and Internet. Summary financial data (in millions) for...

 

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World Report Group has two major divisions: Print and Internet. Summary financial data (in millions) for 2021 and 2022 are as follows: (Click the icon to view the data.) The two division managers' annual bonuses are based on division ROI (defined as operating income divided by total assets). If a division reports an increase in ROI from the previous year, its management is automatically eligible for a bonus; however, the management of a division reporting a decline in ROI has to present an explanation to the World Report Group board and is unlikely to get any bonus. Carol Mays, manager of the Print Division, is considering a proposal to invest $860 million in a new computerized news reporting and printing system. It is estimated that the new system's state-of-the-art graphics and ability to quickly incorporate late-breaking news into papers will increase 2023 division operating income by $86 million. World Report Group uses a 10% required rate of return on investment for each division. Required Requirement 1. Use the DuPont method of profitability analysis to explain differences in 2022 ROIs between the two divisions. Use 2022 total assets as the investment base. Determine the formulas needed, and then calculate the ROI for both divisions in 2022. (Round all ratios to three decimal places.) Required Print Internet Data table Print Internet Operating Income 2021 2022 $ 3,720 $ 520 4,650 685 X X X Print Revenue 2021 2022 $ 18,300 $ 19,200 25,300 26,650 Done = = = ROI = Operating Income / Total Assets Total Assets 2021 $ 18,400 $ 20,750 11,300 12,100 2022 X 1. Use the DuPont method of profitability analysis to explain differences in 2022 return on investments (ROIs) between the two divisions. Use 2022 total assets as the investment base. 2. Why might Mays be less than enthusiastic about accepting the investment proposal for the new system, despite her belief in the benefits of the new technology? 3. Murdoch Turner, CEO of World Report Group, is considering a proposal to base division executive compensation on division residual income (RI). a. Compute the 2022 RI of each division. b. Would adoption of an RI measure reduce Mays's reluctance to adopt the new computerized system investment proposal? 4. Turner is concerned that the focus on annual ROIs could have an adverse long-run effect on World Report Group's customers. What other measurements, if any, do you recommend that Turner use? Explain briefly. Print Done X World Report Group has two major divisions: Print and Internet. Summary financial data (in millions) for 2021 and 2022 are as follows: (Click the icon to view the data.) The two division managers' annual bonuses are based on division ROI (defined as operating income divided by total assets). If a division reports an increase in ROI from the previous year, its management is automatically eligible for a bonus; however, the management of a division reporting a decline in ROI has to present an explanation to the World Report Group board and is unlikely to get any bonus. Carol Mays, manager of the Print Division, is considering a proposal to invest $860 million in a new computerized news reporting and printing system. It is estimated that the new system's state-of-the-art graphics and ability to quickly incorporate late-breaking news into papers will increase 2023 division operating income by $86 million. World Report Group uses a 10% required rate of return on investment for each division. Required Requirement 1. Use the DuPont method of profitability analysis to explain differences in 2022 ROIs between the two divisions. Use 2022 total assets as the investment base. Determine the formulas needed, and then calculate the ROI for both divisions in 2022. (Round all ratios to three decimal places.) Required Print Internet Data table Print Internet Operating Income 2021 2022 $ 3,720 $ 520 4,650 685 X X X Print Revenue 2021 2022 $ 18,300 $ 19,200 25,300 26,650 Done = = = ROI = Operating Income / Total Assets Total Assets 2021 $ 18,400 $ 20,750 11,300 12,100 2022 X 1. Use the DuPont method of profitability analysis to explain differences in 2022 return on investments (ROIs) between the two divisions. Use 2022 total assets as the investment base. 2. Why might Mays be less than enthusiastic about accepting the investment proposal for the new system, despite her belief in the benefits of the new technology? 3. Murdoch Turner, CEO of World Report Group, is considering a proposal to base division executive compensation on division residual income (RI). a. Compute the 2022 RI of each division. b. Would adoption of an RI measure reduce Mays's reluctance to adopt the new computerized system investment proposal? 4. Turner is concerned that the focus on annual ROIs could have an adverse long-run effect on World Report Group's customers. What other measurements, if any, do you recommend that Turner use? Explain briefly. Print Done X

Answer rating: 100% (QA)

ANSWER 1 ROI Dupont Profit Margin x Asset Turnover Profit Margin Asset Turnover ROI Operating Income ... View the full answer