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Required information Skip to question [The following information applies to the questions displayed below.] Westerville Company reported the following results from last years operations: Sales

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[The following information applies to the questions displayed below.]

Westerville Company reported the following results from last years operations:

Sales $ 1,000,000
Variable expenses 300,000
Contribution margin 700,000
Fixed expenses 500,000
Net operating income $ 200,000
Average operating assets $ 625,000

This year, the company has a $120,000 investment opportunity with the following cost and revenue characteristics:

Sales $ 200,000
Contribution margin ratio 60 % of sales
Fixed expenses $ 90,000

The companys minimum required rate of return is 15%.

10-a. If Westervilles chief executive officer will earn a bonus only if her ROI from this year exceeds her ROI from last year, would she pursue the investment opportunity? Yes or No?

10-b. Would the owners of the company want her to pursue the investment opportunity? Yes or No?

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