The Foundational 15 (Static) [LO10-1, LO10-2]

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

Westerville Company reported the following results from last years operations:

Sales	$ 1,000,000
Variable expenses	300,000
Contribution margin	700,000
Fixed expenses	500,000
Net operating income	$ 200,000
Average operating assets	$ 625,000

At the beginning of this year, the company has a $120,000 investment opportunity with the following cost and revenue characteristics:

Sales	$ 200,000
Contribution margin ratio	60	% of sales
Fixed expenses	$ 90,000

The companys minimum required rate of return is 15%.

9. If the company pursues the investment opportunity and otherwise performs the same as last year, what ROI will it earn this year? (Do not round intermediate calculations. Round your percentage answer to 1 decimal place (i.e., 0.1234 should be entered as 12.3).)

11. What is last years residual income?

12. What is the residual income of this years investment opportunity?