Reference no: EM132743021

Question - Megamart, a retailer of consumer goods, provides the following information on two of its departments, each considered an investment center.

Department Sales Income Average Assets

Electronics $40,000,000 $2,880,000 $16,000,000

Sporting Goods $20,000,000 $2,040,000 $12,000,000

Senior management is considering evaluating each department's performance based on two approaches:

a) The DuPont model, and

b) Residual income.

In general, management expects at least a 12% return on investment.

Required - Calculate the returns using both the DuPont model and residual income. Then comment on what the data suggests to you in terms of how well each department is performing. Show all calculations and write in complete sentences.