You were asked to analyze the data below for a client.

Selling price of new widget	$ 20/unit
Estimated sales	250,000 units
Investment in additional equipment	$4,000,000
Cost of production	$17.76/unit
The company's minimum required rate of return	12%

Required:

a. What are the projected sales dollars for the new product?

b. What is the net operating income?

c. Calculate the return on investment (ROI) and residual income.

d. Given the information and your calculations, what advice do you have for the company? Be specific.