The Monarch Division of Allgood Corporation has a current ROI of 12 percent. The company target ROI is 8 percent. The Monarch Division has an
The Monarch Division of Allgood Corporation has a current ROI of 12 percent. The company target ROI is 8 percent. The Monarch Division has an opportunity to invest $4,800,000 at 10 percent but is reluctant to do so because its ROI will fall to 11.25 percent. The present investment base for the division is $8,000,000. Required Calculate the current residual income and the residual income with the new investment opportunity being included. Based on your answers to requirement a, should Monarch Division make the investment?
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