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Within a large rental corporation where the commercial rental segment dominated, Gary managed the residential rental segment. Gary enjoyed taking the underdog role, trying to
Within a large rental corporation where the commercial rental segment dominated, Gary managed the residential rental segment.
Gary enjoyed taking the underdog role, trying to generate more income and higher retums than corporate expected. The corporate
minimum required returm was while its WACC was He recently became aware of new rental properties in a prime location. He
assumed he'd be able to secure two key rental properties in his target area. He considered where his division stood in terms of
profitability and asset position at yearend, and created a projection for the next year as follows.
a
Calculate the ROI for Gary's residential division at the end of the current year and at the end of the following year, per his
projections where operating assets are considered investments Assume that Gary is evaluated on generating a positive
trending ROI. Round answers to decimal places, eg
Current ROI
Projected ROI
If you were him, would you push forward with these real estate purchases?
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