Question (100 Points)
Rivian Inc., a manufacturer of electric vehicles, has three (3) divisions: Automotive, Battery and Energy
Generation. Divisions are treated as investment centres.
The following information is provided:
Total Assets ('000)
Expected Return (Cost of Capital)
Total Revenue ('000)
Total Costs ('000)
Proportion of total costs allocated
from Head Office
Required:
a) Compute the following for the divisions and comment on your results;
i) Absolute Profit
ii) ROI
iii) Residual Income
iv) Comments/Recommendations
Automotive
1,420,000
25%
1,640,000
1,120,000
20%
Battery
1,210,000
18%
1,409,000
1,100,000
25%
Energy Generation
1,840,000
20%
1,526,000
1,142,000
30%
b) There is an opportunity for the company to invest in a project with ROI of 18%. Which division(s) will
be willing to undertake the project? Justify your recommendation.