Indiana Company reported the following results from last year's operations: (35 points)

	Sales	$13,200,000
	Variable expenses	8,490,000
	Contribution margin	4,710,000
	Fixed expenses	3,654,000
	Net operating income	$1,056,000
	Average operating assets	$6,000,000

At the beginning of this year, the company has a $1,000,000 investment opportunity with the following characteristics:

	Sales	$3,400,000
	Contribution margin ratio	50%	of sales
	Fixed expenses	$1,496,000

The company's minimum required rate of return is 17%.

Required:

1. What was last year's residual income?

1. If the company pursues the investment opportunity and otherwise performs the same as last year, what will be the overall residual income this year?

1. If Indiana Companys CEO earns a bonus only if residual income for this year exceeds residual income for last year, would the CEO pursue the investment opportunity?