Westerville Company reported the following results from last years operations:

Sales $1,500,000

Variable expenses 650,000

Contribution margin 850,000

Fixed expenses 580,000

Net operating income 270,000

Average operating assets 1,000,000

This year, the company has a $160,000 investment opportunity with the following cost and revenue characteristics:

Sales 240,000

Contribution margin ratio 70% of sales

Fixed expenses 144,000

The companys minimum required rate of return is 10%

1-11. What is last years residual income?

1-12. What is the residual income of this years investment opportunity?

1-13. If the company pursues the investment opportunity and otherwise performs the same as last year, what residual income will it earn this year?

1-14. If Westervilles chief executive officer will earn a bonus only if her residual income from this year exceeds her residual income from last year, would she pursue the investment opportunity?