Generic Motors Corporation has two divisions Kadillack and Chevrolay. Their performance for last year is as follows.
The required rate of return (cost of capital) for Generic Motors is 10% a year.Required: a) What isthe return on investment(ROI) for
Kadillack ROI =%(enter say 9.5% as 9.5 not as 0.095 and not as 9.5%)
Chevrolay ROI =%
Which division performs better based on ROI? (1=Kadillack 2=Chevrolay) b) What is the residual income (RI) for each division?
Kadillack RI = $million(enter say $3.52 million as 3.52 not as 3520000)
Chevrolay RI = $million
Which division performs better based on RI? (1=Kadillack 2=Chevrolay) c) Which of the two measures (ROI or RI) would you use to decide which division performs better? Briefly explain your reasons.