Multinational performance measurement ROI, RI. The Grandlund Corporation manufactures similar products in the United States and Norway. The U.S. and Norwegian operations are organized as decentralized divisions. The following information is available for 2011; ROI is calculated as operating income divided by total assets:

Both investments were made on December 31, 2010. The exchange rate at the time of Grandlund’s investment in Norway on December 31, 2010, was 6 kroner = $1. During 2011, the Norwegian Kroner increased steadily in value so that the exchange rate on December 31, 2011, is 7 kroner $1. The average exchange rate during 2011 is [(6 + 7) ÷ 2] = 6.5 kroner = $1.

1. a. Calculate the U.S. division’s operating income for 2011.

 b. Calculate the Norwegian division’s ROI for 2011 in kroner

2. Top management wants to know which division earned a better ROI in 2011. What would you tell them? Explain your answer

3. Which division do you think had the heifer RI performance? Explain your answer. The required rate of return on investment (calculated in U.S. dollars) is 12%.

U.S. Division Norwegian Division Operating income 8,100,000 kroner 52,500,000 kroner Total assets $8,000,000 ROI 15%