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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: Sales Variable expenses Contribution
Required information The following information applies to the questions displayed below. Westerville Company reported the following results from last year's operations: Sales Variable expenses Contribution margin Fixed expenses Net operating incone Average operating assets 1,500,000 530,000 970,000 670,000 $ 300,000 937,500 At the beginning of this year, the company has a $212,500 investment opportunity with the following cost and revenue characteristics: Sales Contribution nargin ratio Fixed expenses $ 340,000 70 of sales 187,000 The company's minimum required rate of return is 10%. 15-a. Assume that the contribution margin ratio of the investment opportunity was 60% instead of 70%. 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? O Yes No 15-b. Would the owners of the company want her to pursue the investment opportunity? Yes No
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