1. Norgaard Corporations 2022 budgets include the following estimates:

   • Total revenues of $5,700,000;
   • Total variable expenses of $1,650,000;
   • Total fixed expenses of $2,625,000;
   • Average operating assets of $6,785,000.

   Norgaards management is evaluating a new proposal from a global retailer to sell its products through the retailer. Norgaards CFO estimates that this would be expected to generate new annual revenues of $1,140,000 and new annual fixed expenses of $399.000; Norgaards contribution margin ratio on the sales made through the global retailer is estimated at 50%. Norgaard would also have to make an upfront investment of $712,500 in operating assets (inventories and receivables net of payables).

   The companys cost of capital is 15%.

   Because of the strategic nature of the proposal, the decision to agree to it or not will be made by Elaine Lin, the companys CEO.

   Which of the following statements about residual income (RI) and return on investment (ROI) and the new proposal is true (select only one)?

   	A.	Norgaards CEO would accept the proposal if she were evaluated based on ROI, but would reject the proposal if she were evaluated based on RI
   	B.	Norgaards CEO would accept the proposal if she were evaluated based on RI, but would reject the proposal if she were evaluated based on ROI
   	C.	Norgaards CEO would accept the proposal if she were evaluated based on RI or based on ROI
   	D.	Norgaards CEO would reject the proposal whether she was evaluated based on RI or on ROI
   	E.	None of the statements A-D above is true