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 $725,000 with operating assets of $3,625,000. 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 12%. Round all numbers to two decimal places.

1: Compute the ROI of the:

A: division if the radio project is not undertaken.

B: radio project alone.

C: division if the radio project is undertaken.

2: Compute the residual income of the:

A: division if the radio project is not undertaken.

B: radio project alone.

C: division if the radio project is undertaken.

3: Do you suppose that Leslie will decide to invest in the new radio? Why or why not?