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I know headquarters wants us to add that new product line. said Delf Havasi, manager of Billings Company's Oifice Products Division. But I want to

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"I know headquarters wants us to add that new product line." said Delf Havasi, manager of Billings Company's Oifice Products Division. "But I want to see the numbers before I make any move. Our divislon's return on investment (RO) has led the company for three years, and I don't want any letdown:" Bilings Compamy is a decentralized wholesalet with five autonombus divisions. The divislonis are evaluated on the basis of ROI, with year-end bonuses given to the divislonal managers who have the highest ROts. Operating results for the company's Oifice Products Diviston for this year are given below The company had an overall retum on investment (ROn of 19.00% this year (considering all divisions). Next year the Olfice Products Division has anl oppottunlty to odd a new product line that would requlre an additional investrment that worild increase average operating assets by $2,600,000. The cost and revenue characteristics of the new product line per year would be: 1. Compute the Office Products Division's margin, turnover, and ROI for this year. 2. Compute the Office. Products Division's margin, turnover, and ROI for the new product line by itself: 3. Compute the Office Products Division's margin, turnover, and ROI for next year assuming that it performs the same as this year and adds the new product line. (Do not round intermediate calculations. Round your answers to 2 decimal places.) If you were in Dell Havasi's position, would you accept or reject the new product line? Why do you suppose headquarters is anxious for the Office Products Division to add the new product line? 6. Suppose that the company's minimum required rate of return on operating assets is 16% and that performance is evaluated using residual income. a. Compute the Oifice Products Division's residual income for this year. b. Compute the Office Products Division's residual income for the new product line by itself. c. Compute the Office Products Division's residual income for next year assuming that it performs the same as this year and adds the new product line. Complete this question by entering your answers in the tabs below. Using the residual income approach, if you were in Dell Havasi's position, would you accept on reject the new product line

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