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Paula Boothe, president of the Bridgeport Corporation, has mandated a minimum 10% return on investment...

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Accounting

Paula Boothe, president of the Bridgeport Corporation, has mandated a minimum 10% return on investment for any project undertaken by the company. Given the companys 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 13% 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 $1,818,000 in a new line of energy drinks that is expected to generate $327,000 in operating income. Assume that Bridgeport Corporations actual weighted-average cost of capital is 9% and its tax rate is 30%. A. Calculate the economic value added of the proposed new line of energy drink

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