Problem 5

'H' Division of the Books Company has an opportunity to invest in a new project. The project will yield an incremental operating income of $73,350 on average invested assets of $900,000. Superior Division currently has operating income of $425,000 on average invested assets of $4,325,000. Monroe Company has a 7% hurdle rate for new projects. 5a. What is 'H' Division's ROI after making the investment in the project?

5b. What is 'H' Division's residual income after making the investment in the project?