If the company pursues the investment opportunity and

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Reference no: EM13572659

Westerville Company reported the following results from last year's operations:


Sales	$	1,200,000
Variable expenses		320,000

Contribution margin		880,000
Fixed expenses		640,000

Net operating income	$	228,000

Average operating assets	$	600,000

This year the company has a $150,000 investment opportunity with the following cost and revenue characteristics:


Sales	$	240,000
Contribution margin ratio		50	% of sales
Fixed expenses	$	84,000

The company's minimum required rate of return is 15%.

Required:

If the company pursues the investment opportunity and otherwise performs the same as last year, what residual income will it earn this year?

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Reference no: EM13572659

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