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 $$775,000$ with operating assets of $$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 $13\%.$

Required:

$1.$ Compute the ROI of the following $($round to the nearest whole percent$)$:

a$.$ The division if the radio project is not undertaken. fill in the blank $1$

$\%$

b$.$ The radio project alone. fill in the blank $2$

$\%$

c$.$ The division if the radio project is undertaken. fill in the blank $3$

$\%$

$2.$ Compute the residual income of the following:

a$.$ The division if the radio project is not undertaken. $fill in the blank $4$

b$.$ The radio project alone. $fill in the blank $5$

c$.$ The division if the radio project is undertaken. $fill in the blank $6$

$3.$ This depends on whether Leslie$$s division is evaluated on the basis of ROI or on the basis of residual income. Overall division ROI wills

; so if ROI is the basis for evaluation, she will

the investment. On the other hand, residual income for the project is

and will

overall residual income. If the division is evaluated on the basis of residual income, the project will be