Exercise 10-14 (Part Level Submission) Paula Boothe, president of the Swifty Corporation, has mandated a...
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Exercise 10-14 (Part Level Submission) Paula Boothe, president of the Swifty Corporation, has mandated a minimum 10% return on investment for any project undertaken by the company. Given the company's decentralization, Paula leaves all investment decisions to the divisional managers as long as they anticipate a minimum rate of return of at least 10%. The Energy Drinks division, under the direction of manager Martin Koch, has achieved a 16% return on investment for the past three years. This year is not expected to be different from the past three. Koch has just received a proposal to invest $1,863,000 in a new line of energy drinks that is expected to generate $239,000 in operating income. (a) Calculate the residual income for the proposed new line of energy drinks. Residual income $
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