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Question #3 Consider the following information about a potential project: Investment required $15,000,000 Expected annual project revenue $17,000,000 Expected annual project expenses $14,500,000 Required rate

Question #3

Consider the following information about a potential project:

Investment required

$15,000,000

Expected annual project revenue

$17,000,000

Expected annual project expenses

$14,500,000

Required rate of return

15%

Current division return on investment

19%

a) Calculate the projects return on investment.

b) Based solely on ROI, is this project in the firms best interests? Why or why not?

c) Is this project in the division managers best interests? Why or why not?

d) Perform DuPont Analysis on this project.

e) What is the projects residual income?

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