Reference no: EM131673456
Question: Multinational performance measurement, ROI, RI. The Seaside Corporation manufactures similar products in the United States and Norway. The U.S. and Norwegian operations are organized as decentralized divisions. The following information is available for 2017; ROI is calculated as operating income divided by total assets:
U.S. Division Norwegian Division
Operating income ? 6,84,000 kroner
Total assets $7,700,000 72,000,000 kroner
ROI 15.00% ?
Both investments were made on December 31, 2016. The exchange rate at the time of Seaside's investment in Norway on December 31, 2016, was 9 kroner = $1. During 2017, the Norwegian kroner decreased steadily in value so that the exchange rate on December 31, 2017, is 10 kroner = $1. The average exchange rate during 2017 is [(9 + 10) , 2] = 9.5 kroner = $1.
1. a. Calculate the U.S. division's operating income for 2017.
b. Calculate the Norwegian division's ROI for 2017 in kroner.
2. Top management wants to know which division earned a better ROI in 2017. What would you tell them? Explain your answer.
3. Which division do you think had the better RI performance? Explain your answer. The required rate of return on investment (calculated in U.S. dollars) is 11%.
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