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Westerville Company reported the following results from last years operations: Sales $ 1,500,000 Variable expenses 730,000 Contribution margin 770,000 Fixed expenses 470,000 Net operating income
Westerville Company reported the following results from last years operations:
Sales | $ | 1,500,000 |
Variable expenses | 730,000 | |
Contribution margin | 770,000 | |
Fixed expenses | 470,000 | |
Net operating income | $ | 300,000 |
Average operating assets | $ | 937,500 |
At the beginning of this year, the company has a $362,500 investment opportunity with the following cost and revenue characteristics:
Sales | $ | 580,000 | |
Contribution margin ratio | 70 | % of sales | |
Fixed expenses | $ | 319,000 | |
The companys minimum required rate of return is 10%.
13. If the company pursues the investment opportunity and otherwise performs the same as last year, what residual income will it earn this year?
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