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What is the residual income for the project

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Reference no: EM133058129

Question - Data for Manufacturing Division of a company is as follows:

Manufacturing Division

Division Current ROI 25%

Projected ROI on new Investment Project 17%

Corporate Average ROI 15%

Investment Required in New Project $1,000,000

Current Investment $1,000,000

Required -

1. What is the Residual Income for the Project [Hint Use Average Corporate ROI as Required Rate of Return]?

2. What would be the Division ROI if the company did decide to accept the new project?

3. For an investment center, which measure would be more suitable to motivate the manager to make the investment in the project?

Reference no: EM133058129

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