Paula Boothe, president of the Blue Corporation, has mandated a minimum 10% return...
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Paula Boothe, president of the Blue 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 12%. The Energy Drinks division, under the direction of manager Martin Koch, has achieved a 14% 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 $1,814,000 in a new line of energy drinks that is expected to generate $311,000 in operating income. Assume that Blue Corporation's actual weighted average cost of capital is 10% and its tax rate is 31%. (a) Calculate the economic value added of the proposed new line of energy drinks. (If the economic value added is negative then enter with a negative sign preceding the number, e.g.-5,125 or parenthesis, e.g. (5,125). Round answer to 0 decimal places, e.g. 5,125.) Economic value added $ e Textbook and Media Save for Later Attempts: 0 of 3 used Submit
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