User Friendly Computer is one of the largest personal computer companies in the world. The board of directors was recently (March 2019) informed that User Friendly’s president, Felix Lechat, was resigning to ‘pursue other interests’. An executive search firm recommends that the board consider appointing Peter Diamond (current CEO of Computer Power) or Rachida Kamel (current CEO of Plum Computer). You collect the following financial information on Computer Power and Plum Computer for 2017 and 2018 (in millions): 

In early 2019, a computer magazine gave Plum Computer’s main product five stars (its highest rating on a five-point scale). Computer Power’s main product was given three stars, down from five stars a year ago because of customer-service problems. The computer magazine also ran an article on new-product introductions in the personal computer industry. Plum Computer received high marks for new products in 2014. Computer Power’s performance was called ‘mediocre’. One ‘unnamed insider’ of Computer Power commented: ‘Our new-product cupboard is empty.’ 

Required 

1. Use the DuPont method to analyse the ROI of Computer Power and Plum Computer in 2017 and 2018. Comment on the results. 

2. Calculate the percentage of costs in each of the six business-function cost categories for Computer Power and Plum Computer in 2017 and 2018. Comment on the results. 

3. Rank Diamond and Kamel as potential candidates for CEO of User Friendly Computer.

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Computer Power Plum Computer 2017 2018 2017 2018 Total assets €360.0 €340.0 €160.0 €240.0 Revenues €400.0 €320.0 €200.0 €350.0 Costs R&D 36.0 16.8 18.0 43.5 15.0 Design Production 8.4 3.6 11.6 102.0 112.0 82.8 98.6 Marketing Distribution 75.0 92.4 36.0 66.7 27.0 22.4 18.0 23.2 Customer service 45.0 28.0 21.6 46.4 Total costs 300.0 280.0 180,0 290.0 Operating profit €100.0 €40.0 €20.0 €60.0