Paula Boothe, president of the Marigold Corporation, has mandated a minimum 10% 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 12%. 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 $2,000,000 in a new line of energy drinks that is expected to generate $300,000 in operating income.

A.) Calculate the return on investment expected on the new line of energy drinks. (Round answer to 1 decimal place, e.g. 5.1%.) Return on investment: ____ %

B.) If Martin Koch is evaluated based on the divisions return on investment, will he choose to invest in the new line?

Yes / No

C.) Would Paula Boothe prefer that Martin Koch invest in the new line?

Yes / No