Management has determined that in order to upgrade the competitor to Megatronics standards, an additional $375,000 of invested capital would be needed. a. Compute the current ROI of the Northeast Division and the division's ROI if the competitor is acquired. b. If divisional management is being evaluated on the basis of ROI, will the Northeast Division likely pursue acquisition of the competitor? c. Compute the ROI of the competitor as it is now and after the intended upgrade.
Management has determined that in order to upgrade the competitor to Megatronics standards, an additional $375,000 of invested capital would be needed.
a. Compute the current
b. If divisional management is being evaluated on the basis of ROI, will the Northeast Division likely pursue acquisition of the competitor?
c. Compute the ROI of the competitor as it is now and after the intended upgrade.
d. If ROI is used as the basis for evaluation, would Megatronics Corporation likely be in
favor of the acquisition of the competitor?
e. Calculate the Northeast Division's ROI after acquisition of competitor but before upgrad-
ing.
f. Assume that Megatronics uses residual income to evaluate performance and desires a 12 percent minimum return on invested capital. Compute the current residual income of the Northeast Division and the division's residual income if the competitor is acquired.
g. If divisional management is being evaluated on the basis of residual income, will the Northeast Division likely pursue acquisition of the competitor?
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