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tu on Investment and Investment Decisions se Blandings, division manager of Audiotech Inc., was debating the merits of a new product-a weather radio that would
tu on Investment and Investment Decisions se Blandings, division manager of Audiotech Inc., was debating the merits of a new product-a weather radio that would put out a warning if the county which the listener Uved were under a severe thunderstorm or tornado alert. The budgeted income of the division was $775,000 with operating assets of $4,825,000. The proposed investment would add income of $640,000 and woul equire an additional investment in equipment of $4,000,000. The minimum required return on investment for the company is 14%. Required: 1. Compute the ROI of the following (round to the nearest whole percent): a. The division if the radio project is not undertaken. b. The radio project alone. The division if the radio project is undertaken. 2. Compute the residual income of the following: a. The division if the radio project is not undertaken. b. The radio project alone. c. The division if the radio project is undertaken. % % 000 3. This depends on whether Leslie's division is evaluated on the basis of RO1 or on the basis of residual income. Overall division ROI wills so if ROI is the basis for evaluation, she will the investment. On the other hand, residual income for the project and will overall residual income. If the division is evaluated on the basis of residual income, the project will
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