Westerville Company reported the following results from last years operations:

Sales	$	1,400,000
Variable expenses		510,000
Contribution margin		890,000
Fixed expenses		610,000
Net operating income	$	280,000
Average operating assets	$	875,000

At the beginning of this year, the company has a $175,000 investment opportunity with the following cost and revenue characteristics:

Sales	$	280,000
Contribution margin ratio		50	% of sales
Fixed expenses	$	98,000

The companys minimum required rate of return is 15%.

8. If the company pursues the investment opportunity and otherwise performs the same as last year, what turnover will it earn this year? (Round your answer to 2 decimal places.)

9. If the company pursues the investment opportunity and otherwise performs the same as last year, what ROI will it earn this year? (Round your percentage answer to 1 decimal place (i.e., 0.1234 should be considered as 12.3%.))

10-a. If Westervilles chief executive officer will earn a bonus only if her ROI from this year exceeds her ROI from last year, would she pursue the investment opportunity?

multiple choice 1

• Yes

• No

10-b. Would the owners of the company want her to pursue the investment opportunity?

multiple choice 2

• Yes

• No

11. What is last years residual income?