Consider the following data from Trident Financial, Inc., which wishes to evaluate the financial performance of its two main divisions, mortgage loans and consumer loans (data in $ millions):

Requirements
1. Based on ROI, which division is more successful? Why?

2. Trident uses residual income (RI) as a measure of management success. What is the residual income (RI) for each division if the minimum desired rate of return is (a) 10 percent, (b) 15 percent, and (c) 20%? Which division is more successful under each of these rates?

Problem Information Consumer Loans $20,000 $2,500 12.50% iortgage Loans Average total assets Operating income $2,000 $400 20%