Use the DuPont method of profitability analysis to explain differences in 2017 ROIs between the two divisions. Use 2017 total assets as the investment base Transcribed Image Text: ROI, RI,

Use the DuPont method of profitability analysis to explain differences in 2017 ROIs between the two divisions. Use 2017 total assets as the investment base Transcribed Image Text: ROI, RI, DuPont method, investment decisions, balanced scorecard. News Report Group has
two major divisions: Print and Internet. Summary financial data (in millions) for 2016 and 2017 are as
follows:
Home
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Page Layout
Formulas
Data
Review
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н
Total Assets
A
в
Operating Income
Revenues
2016
2017
2016
2017
2016
2017
$18,700 $22,500
$18,200 $25,000
10,000
3.
Print
$3,720
$4,500
4 Internet
525
690
25,000
23,000
11,150
The two division managers’ annual bonuses are based on division ROI (defined as operating income divided
by total assets). If a division reports an increase in ROI from the previous year, its management is automati-
cally eligible for a bonus; however, the management of a division reporting a decline in ROI has to present
an explanation to the News Report Group board and is unlikely to get any bonus.
Carol Mays, manager of the Print division, is considering a proposal to invest $2,580 million in a new
computerized news reporting and printing system. It is estimated that the new system’s state-of-the-art
graphics and ability to quickly incorporate late-breaking news into papers will increase 2018 division
operating income by $360 million. News Report Group uses a 10% required rate of return on investment
for each division.

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