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The Blue Division has a current ROI of 14 percent. The company target ROI is 10 percent. The Blue Division has an opportunity to invest
The Blue Division has a current ROI of 14 percent. The company target ROI is 10 percent. The Blue Division has an opportunity to invest $5,400,000 at 12 percent but is reluctant to do so because its ROl will fall to 13.20 percent. The present investment base for the division is $8,100,000. Required 1. Calculate the current residual income and the residual income with the new investment opportunity being included. 2. Based on your answers to requirement a, should Blue Division make the investment? YOU MUST SHOW YOUR WORK TO EARN CREDIT
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