Question 4 PERFORMANCE ASSESSMENT (10 MARKS) The Outdooricate Company has three separate divisions, producing marine, sporting and outdoor goods. As the Chief Executive Officer (CEO), you are examining the 2019 performance of the three divisions in preparation for discussing an investment option for the smallest of the three, Marine Products. You have the most recent operating income and net assets figures which are shown in Exhibit 5. Exhibit 5. Accounting Information for Outdooricate Company DIVISION Marine Products Sporting Goods Outdoor Equipment NET ASSETS 2019 2018 $000 $000 $10,000 $12,000 $30,000 $28,000 $20,000 $23,000 OPERATING INCOME 2019 $000 $1,800 $4,500 $3,200 You have received a proposal from the Divisional Manager of Marine Products to expand the division in support of a new range of boats. Under the proposal it is expected that sales for the division will increase by about 30%, contribution margin will be $4,500,000 and operating income will be $2,500,000 in the first year. Capital investment will increase by $6,500,000 in that year. The Marine Products Division is an investment centre, so you would not normally be involved in the decision to expand. The Divisional Manager has asked for the discussion of the new project, and you wonder why. Required: (a) Using the 2019 year-end net asset figures calculate the current return on investment (ROI) for: i. each of the divisions of Outdooricate Company; and ii. the company as a whole. (2 marks) (b) Using average net asset figures calculate the current return on investment (ROI) for: i. each of the divisions of Outdooricate Company; and ii. the company as a whole. (3 marks) TURN OVER 11 ACCT222 (c) Calculate the ROI of Marine Products in the next year if the expansion goes ahead as planned, using: i. Year-end net assets; and alternatively ii. Average net assets (2 marks) (d) Suggest some reasons why the Divisional Manager of Marine Products might be uncertain about the expansion. How might you, as CEO of the company, respond