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13. If the company pursues the investment opportunity and otherwise performs the same as last year, what residual income will it earn this year? 14.
13. If the company pursues the investment opportunity and otherwise performs the same as last year, what residual income will it earn this year?
14. If Westervilles chief executive officer will earn a bonus only if her residual income from this year exceeds her residual income from last year, would she pursue the investment opportunity?
Westerville Company reported the following results from last year's operations: Sales Variable expenses Contribution margin Fixed expenses Net operating income Average operating assets $ 1,800,000 435,000 1,365,000 1,005,000 $ 360,000 $ 1,200,000 At the beginning of this year, the company has a $300,000 investment opportunity with the following cost and revenue characteristics: Sales Contribution margin ratio Fixed expenses $ 360,000 70% of sales $ 216,000 The company's minimum required rate of return is 10%
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