Question
Paula Boothe, president of the Culver Corporation, has mandated a minimum 7% return on investment for any project undertaken by the company. Given the company's
Paula Boothe, president of the Culver Corporation, has mandated a minimum 7% return on investment for any project undertaken by the company. Given the company's decentralization, Paula leaves all investment decisions to the divisional managers as long as they anticipate a minimum rate of return of at least 9%. The Energy Drinks division, under the direction of manager Martin Koch, has achieved a 15% 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 $1,920,000 in a new line of energy drinks that is expected to generate $226,700 in operating income.
Calculate the residual income for the proposed new line of energy drinks.
Residual income
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