Question
Paula Boothe, president of theSarasotaCorporation, has mandated a minimum6% return on investment for any project undertaken by the company. Given the company's decentralization, Paula leaves
Paula Boothe, president of theSarasotaCorporation, has mandated a minimum6% 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 least8%. The Energy Drinks division, under the direction of manager Martin Koch, has achieved a16% 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 $1,962,000in a new line of energy drinks that is expected to generate $224,800in operating income.
(a)
Calculate the residual income for the proposed new line of energy drinks.
Residual income$
enter the residual income in dollars
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