Selected sales and operating data for three divisions of different structural engineering firms are given as follows:

Division A Division B Division C

Sales $ $12,570,000$ $ $14,665,000$ $ $26,187,500$

Average operating assets $ $3,142,500$ $ $7,332,500$ $ $5,237,500$

Net operating income $ $628,500$ $ $586,600$ $ $838,000$

Minimum required rate of return $14\%10\%16\%$

Required:

$1.$ Compute the return on investment $($ROI$)$ for each division using 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 investment opportunity that would yield a $15\%$ rate of return.

a$.$ If performance is being measured by ROI, which division or divisions will probably accept or reject the opportunity?

b$.$ If performance is being measured by residual income, which division or divisions will probably accept or reject the opportunity?