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He investment and Investment Decisions Leslie Blandings, division manager of Audiotech Inc., was debating the merits of a new product a weather radio that would
He investment and Investment Decisions Leslie Blandings, division manager of Audiotech Inc., was debating the merits of a new product a weather radio that would put out a warning if the county in which the listener lived were under a severe thunderstorm or tornado alert. The budgeted income of the division was $925,000 with operating assets of $5,425,000. The proposed Investment would add income of $640,000 and would require an additional investment in equipment of $4,000,000. The minimum required return on investment for the company is 14%. Required: 1. Compute the ROI of the following (round to the nearest whole percent): a. The division if the radio project is not undertaken. % b. The radio project alone. % c. The division if the radio project is undertaken. 2. Compute the residual income of the following: a. The division if the radio project is not undertaken. b. The radio project alone. c. The division if the radio project is undertaken. ROL
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