Assume Benson Modems, Inc., is a division of Gilmore Business Products (GBP). GBP uses ROI as the primary measure of managerial performance. GBP has a desired return on investment (ROI) of 3.20 percent. The company has $130,000 of investment funds to be assigned to its divisions. The president of Benson is aware of an investment opportunity for these funds that is expected to yield an ROI of 3.80 percent. Income Statement Sales revenue $ 630,000 Cost of goods sold (470,000 ) Gross margin $ 160,000 Sales commission (33,000 ) Depreciation expense (12,000 ) Administrative expense (72,550 ) Net income $ 42,450 Balance Sheet Assets: Cash $ 712,450 Manufacturing equipment, net of accumulated depreciation 220,000 Office equipment, net of accumulated depreciation 30,000 Total assets $ 962,450 Equity: Common stock $ 920,000 Retained earnings 42,450 Total equity $ 962,450 Required a-1. Calculate the existing ROI for Benson. a-2. Based on your computations will the President of Benson accept or reject the $130,000 investment opportunity? c-1. Calculate the estimated residual income of the new investment opportunity. c-2. Based on the residual income would the President of Benson accept or reject the $130,000 investment opportunity?

Complete this question by entering your answers in the tabs below.

Req A1 and A2

Req C1 and C2

Calculate the existing ROI for Benson. Based on your computations will the President of Benson accept or reject the $130,000 investment opportunity? (Round your answer to 2 decimal places. (i.e., .2345 should be entered as 23.45).)

a-1.	ROI		%
a-2.	Will the President of Benson accept or reject the computations?

Complete this question by entering your answers in the tabs below.

Req A1 and A2

Req C1 and C2

Calculate the estimated residual income of the new investment opportunity. Based on the residual income would the President of Benson accept or reject the $130,000 investment opportunity?

c-1.	Residual income	$
c-2.	Would the President of Benson accept or reject the residual income?