ROI computations comparing net and gross book value. The following information relates to the operating performance of two divisions ofWorld Electronics, Inc., for last year. U.S.Division Australian Division

Operating Profit......................................................... $ 3,000,000 $4,000,000 Total Assets (at gross acquisition cost).................... 20,000,000 50,000,000 Total Assets (net of accumulated depreciation)........15,000,000 15,000,000

a. Compute the return on investment (ROI) of each division, using total assets at gross book value as the investment base. b. Compute the ROI of each division, using total assets net of accumulated depreciation (net book value) as the investment base. c. Which of the two measures do you think gives the better indication of operating performance? Explain your reasoning.