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13 Mill Company reported the following results from last year's operations: Sales Variable expenses Contribution margin Fixed expenses Net operating income Average operating assets $1,900,000
13 Mill Company reported the following results from last year's operations: Sales Variable expenses Contribution margin Fixed expenses Net operating income Average operating assets $1,900,000 $550,000 S1,350,000 $875,000 $475,000 $1,187,500 This year, the company has a $237.500 investment opportunity with the following costs and revenue: $380,000 50% $133.000 The company's minimum required rate of return is Sales Contribution margin ratio Fixed expenses I 5% Which of the following statements is true? A. If Mill's chief executive officers (CEO's) bonus is based on ROl, then she would pursue the investment opportunity B. If Mill's CEO's bonus is based on ROl, then she would NOT pursue the investment opportunity because the ROI on the new investment opportunity is less than the company's minimum required rate of return. C. If Mill's CEO's bonus is based on residual income, then she would NOT pursue the investment D. If Mill's CEO's bonus is based on residual income, then she would pursue the investment opportunity. E. Regardless how her bonus is determined, the CEO would pursue the investment opportunity because it is good for the company
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