The following excerpt is from Coca-Cola Company’s 2017 annual report filed with the SEC:

Management evaluates the performance of our operating segments separately to individually monitor the different factors affecting financial performance. Our Company manages income taxes and certain treasury-related items, such as interest income and expense, on a global basis within the Corporate operating segment. We evaluate segment performance based on income or loss before income taxes.*

*2017. Investors Info: SEC Filings. Coca Cola Company.

Selected segment data for Coca-Cola Company for the 2017 and 2016 fiscal years follow. Dollar amounts are in millions.

Required

a. Compute the ROI for each of Coke’s geographical segments for each fiscal year. Which segment appears to have the best performance during 2017 based on their ROIs? Which segment showed the most improvement from 2016 to 2017?

b. Assuming Coke’s management expects a minimum return of 30 percent, calculate the residual income for each segment for each fiscal year. Which segment appears to have the best performance based on residual income? Which segment showed the most improvement from 2016 to 2017?

c. Explain why the segment with the highest ROI in 2017 was not the segment with the highest residual income.

d. Assume the management of Coke is considering a major expansion effort for the next five years. On which geographic segment would you recommend Coke focus its expansion efforts? Explain the rationale for your answer.

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Europe, Middle Latin East, & Africa Amerlca America North Asla Pacific 2017 Flscal Year Net operating revenues $7,322 $3,956 $8,651 $4,767 Income before taxes 3,706 2,211 2,307 17,619 2,179 Identifiable operating assets 5,475 1,896 2,072 2016 Fiscal Year $ 6,437 2,560 16,566 Net operating revenues $7,041 $3,746 $4,788 Income before taxes 3,749 4,067 1,966 1,785 2,238 2,024 Identifiable operating assets