Appletree Corporation is one of the largest technology and smart phone companies in the world. The board of directors was recently (March 2021) informed that Appletree’s chief executive officer (CEO) was resigning to ‘pursue other interests’. An executive search firm recommends that the board consider appointing Peter Diamond (current CEO of DigitalSolutions) or Norma Provan (current CEO of ZeroPower). You have collected the following financial information on DigitalSolutions and ZeroPower for 2019 and 2020 (in millions).

	DigitalSolutions		ZeroPower
	2019	2020	2019	2020
Total assets	$360.0	$340.0	$160.0	$240.0
Revenues	$400.0	$365.0	$200.0	$350.0
Costs:
Research & development	36.0	7.8	18.0	43.5
Product design	15.0	5.2	3.6	11.6
Manufacturing	102.0	104.0	82.8	98.6
Marketing	75.0	96.2	36.0	66.7
Distribution	27.0	20.8	18.0	23.2
Customer service	45.0	26.0	21.6	46.4
Total costs	$300.0	$260.0	$180.0	$290.0
Profit	$100.0	$105.0	$20.0	$60.0

In early 2021, an influential technology magazine gave ZeroPower’s main product five stars (its highest rating on a 5-point scale). DigitalSolution’s main product was given three stars, down from five stars a year ago because of customer-service problems. The technology magazine also ran an article on new-product introductions in the digital technology industry. ZeroPower received high marks for new products in 2021. DigitalSolution’s performance was called ‘ordinary’. One ‘unnamed insider’ of DigitalSolutions commented, “our new-product cupboard is empty”.

Required:

1. Use investment turnover and return on sales to analyse the return on investment (ROI) of DigitalSolutions and ZeroPower in 2019 and 2020. Comment on the results. (8 marks)

2. Examine and comment on spending levels in the six business-function cost categories above for DigitalSolutions and ZeroPower in 2019 and 2020 (i.e., research and development, product design etc.). Highlight any obvious or noteworthy trends between the two companies and potential implications of these. (4 marks)

3. Rank Diamond (current CEO DigitalSolutions) and Provan (current CEO ZeroPower) as potential candidates for CEO of Appletree Corporation. Explain your answer. (4 marks)

Answer rating: 100% (QA)

1 Digital Solutions ZeroPower Analysis comments 2019 2020 2019 2020 Investment turnover RevenuesTotal assets 1Revenues 400 365 200 350 2Total assets 360 340 160 240 ITO12 111 107 125 146 revenue gener... View the full answer