Copeland Company is an investment center and an operating segment of Bobcat International Corporation. Copeland Company is currently earning an ROI of 16% on average operating assets of $15,000,000 as of January 1, 2015. On January 1, 2015 the company has the opportunity to make an investment which will cost $4,000,000 and which they believe will yield a 12.5% return (ROI). Bobcat International Corporation expects its investment centers to earn at least 10% on all new investments.

REQUIRED:

Calculate the operating income Copeland Company is currently earning.

Calculate the operating income the investment is expected to earn.

Calculate the average operating assets Copeland Company will have at year end if they make the investment.

Calculate the operating income Copeland Company will have if they make the investment.

What will Copeland Companys ROI be if they make the investment?

If the CEO of Copeland Company is evaluated based on ROI will Copeland Company make the investment?

Calculate the Residual Income for Copeland Company before making the investment.

Calculate the Residual Income for Copeland Company assuming that they make the investment.

If the CEO of Copeland Company is evaluated based on Residual Income will Copeland Company make the investment?

RETURN ON INVESTMENT Before Investment Investment After Investment Link to the following to answer evaluation questions: YES NO Operating Income Average Operating Assets 15,000,000 $4,000,000 Return on Investment 16.00% 12.50% Assuming that Copeland Company is evaluated based on ROl only, will Copeland Company make the Investment? RESIDUAL INCOME Corporate Desired ROI Operating Income Desired Operating Income 10.00% Before Investment After Investment Residual Income Assuming that Copeland Company is evaluated based on Residual Income only, will Copeland Company make the Investment