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Westerville Company reported the following results from last years operations: Sales $ 1,200,000 Variable expenses 420,000 Contribution margin 780,000 Fixed expenses 600,000 Net operating income
Westerville Company reported the following results from last years operations:
Sales | $ 1,200,000 |
---|---|
Variable expenses | 420,000 |
Contribution margin | 780,000 |
Fixed expenses | 600,000 |
Net operating income | $ 180,000 |
Average operating assets | $ 600,000 |
At the beginning of this year, the company has a $137,500 investment opportunity with the following cost and revenue characteristics:
Sales | $ 220,000 | |
---|---|---|
Contribution margin ratio | 60 | % of sales |
Fixed expenses | $ 99,000 |
The companys minimum required rate of return is 20%.
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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