4 and 5

4. Norbert Inc.'s current net operating income is $18,800 and its average operating assets are $80,000. The company's required rate of return is 17%. A new project being considered would require an investment of $15,000 and would generate annual net operating income of $4,500. What is the residual income of the new project? [10 points) Answer: 5. A study has been conducted by Ralph Inc., to determine if Product A should be dropped. Sales of the product total $300,000 per year, variable expenses total S160,000 per year. Fixed expenses charged to the product total $150,000 per year. The company estimates that S60,000 of these fixed expenses will continue even if the product is dropped. Based on this data if Product A is dropped, the company's overall net operating income would increase or decrease by: 110 points