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

Westerville Company reported the following results from last years operations:

Sales	$	2,200,000
Variable expenses		660,000
Contribution margin		1,540,000
Fixed expenses		1,100,000
Net operating income	$	440,000
Average operating assets	$	1,375,000

At the beginning of this year, the company has a $275,000 investment opportunity with the following cost and revenue characteristics:

Sales	$	440,000
Contribution margin ratio		60	% of sales
Fixed expenses	$	220,000

The companys minimum required rate of return is 15%.

14. If Westervilles 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

15-a. Assume that the contribution margin ratio of the investment opportunity was 55% instead of 60%. If Westervilles 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

15-b. Would the owners of the company want her to pursue the investment opportunity?

• Yes

• No