Consider the following data (in millions) from Midwest Financial, Inc., which has two main divisions: mortgage loans, and consumer loans:

Required
1. Based on ROI, which division is more successful? Why?
2. Midwest uses RI as a measure of the financial performance of its divisions. What is the residual income (RI) for each division if the minimum desired rate of return is?
(a) 10 percent,
(b) 15 percent,
(c) 20 percent?
Which division is more successful under each of theserates?

Mortgage Loans $2,000 S400 20% Consumer Loans Average total assets Operating income ROI $20,000 $2,500 12.5%