The following information relates to the Chemical Division of Madison Corporation toward the end of the year:

.

Contribution margin $90,000

Net operating income $60,000

Minimum required rate of return (according to management policy) 8%

Actual Return on investment 10%

.

Assume that the division is being evaluated solely on the basis of residual income and has capital available to invest. The division manager has two investment options available, one of which is expected to earn a return of 9% and one that is expected to earn a return of 12%. As the year draws to a close, the manager of the Madison Division would want to:

Multiple Choice

• invest in the project that is expected to earn a return of 9%.

• invest in the project that is expected to earn a return of 12%.

• invest in both of these projects.

• invest in neither of these two projects.