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ROI and Residual Income: Impact of a New Investment The Mustang Division of Detroit Motors had an operating income of $900,000 and net assets
ROI and Residual Income: Impact of a New Investment The Mustang Division of Detroit Motors had an operating income of $900,000 and net assets of $5,000,000. Detroit Motors has a target rate of return of 16 percent. (a) Compute the return on investment. (Round your answer to three decimal places.) 0.18 (b) Compute the residual income. $ 100,000 (c) The Mustang Division has an opportunity to increase operating income by $200,000 with an $850,000 investment in assets. 1. Compute the Mustang Division's return on investment if the project is undertaken. (Round your answer to three decimal places.) 0 2. Compute the Mustang Division's residual income if the project is undertaken. $ 0
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