Question

Return on Investment and Investment Decisions Leslie Blandings, division manager of Audiotech Inc., was debating the merits of a new product—a weather radio that would put out a warning if the county in which the listener lived were under a severe thunderstorm or tornado alert. The budgeted income of the division was $725,000 with operating assets of $3,925,000. The proposed investment would add income of $640,000 and would require an additional investment in equipment of $4,000,000. The minimum required return on investment for the company is 14%. Required: 1. Compute the ROI of the following (round to the nearest whole percent): a. The division if the radio project is not undertaken. % b. The radio project alone. % c. The division if the radio project is undertaken. % 2. Compute the residual income of the following: a. The division if the radio project is not undertaken. $ b. The radio project alone. $ c. The division if the radio project is undertaken. $

Answer 1

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