Assume Franklin 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 4.30 percent. The company has $170,000 of investment funds to be assigned to its divisions. The president of Franklin is aware of an investment opportunity for these funds that is expected to yield an ROI of 4.80 percent.

Income Statement
Sales revenue	$	670,000
Cost of goods sold		(490,000	)
Gross margin	$	180,000
Sales commission		(37,000	)
Depreciation expense		(16,000	)
Administrative expense		(73,350	)
Net income	$	53,650

Balance Sheet
Assets:
Cash	$	719,650
Manufacturing equipment, net of accumulated depreciation		260,000
Office equipment, net of accumulated depreciation		34,000
Total assets	$	1,013,650
Equity:
Common stock	$	960,000
Retained earnings		53,650
Total equity	$	1,013,650

Required

a-1. Calculate the existing ROI for Franklin.

a-2. Based on your computations will the President of Franklin accept or reject the $170,000 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 Franklin accept or reject the $170,000 investment opportunity?

Calculate the existing ROI for Franklin. Based on your computations will the President of Franklin accept or reject the $170,000 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 Franklin accept or reject the computations?	Reject or Accept?

Calculate the estimated residual income of the new investment opportunity. Based on the residual income would the President of Franklin accept or reject the $170,000 investment opportunity?

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