Exercise $10-12($Algo$)$ Evaluating New Investments Using Return on Investment $($ROI$)$ and Residual Income $[$LO$10-1,$ LO$10-2]$

Selected sales and operating data for three divisions of different structural engineering firms are given below:

$$Division ADivision BDivision CSales$ $12,240,000$$ $14,280,000$$ $25,500,000$Average operating assets$ $3,060,000$$ $7,140,000$$ $5,100,000$Net operating income$ $612,000$$ $571,200$$ $816,000$Minimum required rate of return$14\%10\%16\%$

Required:

Compute each division$$s margin, turnover, and return on investment $($ROI$).$

Compute each division$$s residual income.

Assume each division is presented with an investment opportunity yielding a $15\%$ rate of return.

If performance is being measured by ROI, which division or divisions will probably accept the opportunity?If performance is being measured by residual income, which division or divisions will accept the opportunity?