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Required information [The following information applies to the questions displayed below.] Westerville Company reported the following results from last year's operations: At the beginning of
Required information [The following information applies to the questions displayed below.] Westerville Company reported the following results from last year's operations: At the beginning of this year, the company has a $300,000 investment opportunity with the following cost and revenue characteristics: The company's minimum required rate of return is 15%. 11. What is last year's residual income? 12. What is the residual income of this year's investment opportunity? 13. If the company pursues the investment opportunity and otherwise performs the same as last year, what residual income will it earn this year? 14. If Westerville's chlef executive officer will earn a bonus only if her residual income from this year exceeds her residual income from last year, would she pursue the investment opportunity? Yes No 15-a. Assume that the contribution margin ratio of the investment opportunity was 75% instead of 80%. If Westerville's Chief Executive Officer will earn a bonus only if her residual income from this year exceeds her residual income from last year, would she pursue the investment opportunity? Yes No
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