Paula Boothe, president of the Bramble Corporation, has mandated a minimum 8% return on investment for any project undertaken by the company. Given the companys decentralization, Paula leaves all investment decisions to the divisional managers as long as they anticipate a minimum rate of return of at least 10%. The Energy Drinks division, under the direction of manager Martin Koch, has achieved a 16% return on investment for the past three years. This year is not expected to be different from the past three. Koch has just received a proposal to invest $1,850,000 in a new line of energy drinks that is expected to generate $224,300 in operating income.

(a)

Calculate the residual income for the proposed new line of energy drinks.

Residual income

$enter the residual income in dollars