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Wescott Company has three divisions: A; B, and C. The company has a hurdle rate of 8 percent. Selected operating data for the three divisions
Wescott Company has three divisions: A; B, and C. The company has a hurdle rate of 8 percent. Selected operating data for the three divisions are as follows: Wescott is considering an expansion project in the upcoming year that will cost $5 million and return $450,000 per year. The project would be implemented by only one of the three divisions. Required: 1. Compute the ROI for each division. (Do not round your intermediate calculations.) 2. Compute the residual income for each division. (Loss amounts should be indicated by a minus sign.) 3. Rank the divisions according to the ROI and residual income of each. 4-a. Compute the return on the proposed expansion project. Return on Proposed Expansion Project %
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