Question: Delta Company is considering setting up a new division with an estimated divisional profit of $98,000 per year and a divisional investment of $1,000,000. The

Delta Company is considering setting up a new division with an estimated divisional profit of $98,000 per year and a divisional investment of $1,000,000. The required rate of return is 10%. Calculate the performance measures Return on Investment (ROI) and Residual Income (RI) based on the above information. On the basis of your calculations, should Delta Company go ahead and set up the new division? Explain why or why not.

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