ol fx B E .289 milion C D E F G H Carf's Connection manufacturers add-on products for the automobile industry. The manager at Carl's Connection has just been presented the opportunity to invest in two independent projects. The first is an air conditioner for the back seats of vans. The second opportunity is a turbocharger for sedans. Without either investment, the company currently expects average assets for the coming year to be $28.9 million and expects operating income to be $4.335 million. Below is the expected cost (outlay) for each investment and their expected operating income. It can be assumed that the outlay is the value of the asset. Outlay Operating Income Air Conditioner Turbocharger 750,000.00 $540,000.00 82,080.00 90,000.00 $ $ $ 1. Compute the ROI for each investment by itself. After in percent form, round to the nearest hundredth. (2 points. MUST use a formula in the cell for your calculation). ROI, Air Conditioner: ROI, Turbocharger: 90000/750000 82080/540000+ 12% 15.2% 2. Compute the company-wide ROI for each alternative below. After in percent form, round to the nearest hundredth (4 points. MUST use a formula in the cell for your calculation). Company ROI, if only the air conditioner Investment is made: Company ROI, If only the turbocharger Investment is made: Company ROI, If both investments are made: Company ROI, If neither investment is made: 14.92% (54.335 million+ $90,000)/($28.9 million +$750,000) 15.00% ($4.335 million+ $82,080)/($28.9 million+ $540,000) 14.93% ($4.335 million+ $90,000+ $82,080)/(528.9 million +$750,000+ $540,000) 15.00% $4.335 million/$28.9 million 3. If the manager is rewarded on the basis of ROI performance of his/her investment choice only, which investment would he/she choose? Would this be the same decision, if he/she was choosing an alternative based on which ROI was best for the company? Explain your reasoning. (3 points) 4. Suppose the company sets a minimum required rate of return equal to 14% Calculate the residual income (RI) for each of the following alternatives. (4 points. MUST use a formula in the cells for your calculations) Company RI, if only the air 4 conditioner investment is made: $ 274,000.00 ($4.335 million $90,000)-14% (5750,000 $28.9 million) 25 Company RI, if only the turbocharger investment is made: 295,480.00 (54.335 million 582,080)-14% (5540,000 +$28.9 million) 4. Suppose the company sets a minimum required rate of return equal to 14%. Calculate the residual income (RI) for each of the following alternatives. (4 points. MUST use a formula in the cells for your calculations). Company RI, If only the air conditioner Investment is made: 274,000.00 ($4.335 million +$90,000)-14% ($750,000+ $28.9 million) Company RI, If only the turbocharger Investment is made: $ Company RI, if both investments are made: Company RI, If neither Investment is made: 295,480.00 ($4.335 million+ $82,080)-14% ($540,000 +$28.9 million) 280/480.00 ($4.335 million+ $82,080+$90,000)-14% ($540,000 $750,000+ $28.9 million) 289 million $4.335 million-14% $28.9 million 5. Based on the consideration of residual income alone, which option should the manager choose for the company? Explain why. (2 points) 6. Do you think that ROI or RI is a better indicator of performance? Explain why. (2 points)