Question
The Wade Division of Geisler Corporation has a current ROI of 20 percent. The company target ROI is 13 percent. The Wade Division has an
The Wade Division of Geisler Corporation has a current ROI of 20 percent. The company target ROI is 13 percent. The Wade Division has an opportunity to invest $5,000,000 at 18 percent but is reluctant to do so because its ROI will fall to 19.21 percent. The present investment base for the division is $7,650,000. Calculate the NEW residual income if the investment opportunity is adopted. I was able to calculate current residual income without the 5,000,000 investment but I cannot figure out residual income with the 5,000,000 investment taken into account. Thank you!
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