Exercise 10-9 (Part Level Submission) Paula Boothe, president of the Bndgeport C
ID: 2533994 • Letter: E
Question
Exercise 10-9 (Part Level Submission) Paula Boothe, president of the Bndgeport Corporation, has mandated ? minimum 12% return on iw stment or 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 o retum of at least 12% he Energy rinks division under the direction o manager Martin Koch has achieve a 15% retum or investment for the past three years is year is not expected to be different from the past three. Koch has just received a proposal to invest $1,80D,000 in a new line of energy drinks that is expected to generate $225,000 in operating income. ? (a) Your answer is incorrect. again. Calculate the return on investment expected on the new line of energy drinks. (Round answer to 1 decimal place, e.g. 5.1%.) Return on Investment Attempts: 2 of 4 used SAVE FoR LATER SUBMIT ANSWERExplanation / Answer
Answer a.
Investment in New Line = $1,800,000
Expected Operating Income = $225,000
Return on Investment = Expected Operating Income / Investment in New Line
Return on Investment = $225,000 / $1,800,000
Return on Investment = 12.5%
So, the return on investment expected on the new line of energy drink.
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