Westerville Company reported the following results from last years operations:

Sales

$

1,400,000

Variable expenses

720,000

Contribution margin

680,000

Fixed expenses

470,000

Net operating income

$

210,000

Average operating assets

$

875,000

At the beginning of this year, the company has a $350,000 investment opportunity with the following cost and revenue characteristics:

Sales	$	560,000
Contribution margin ratio		70	% of sales
Fixed expenses	$	336,000

The companys minimum required rate of return is 15%.

Required

1. What is the ROI related to this years investment opportunity?

2. If the company pursues the investment opportunity and otherwise performs the same as last year, what margin will it earn this year?

3. If the company pursues the investment opportunity and otherwise performs the same as last year, what turnover will it earn this year?

4. What is last years residual income?

5. If the company pursues the investment opportunity and otherwise performs the same as last year, what residual income will it earn this year?