Problem
Weski Corporation had net operating income of $300,000 and average operating assets of $1,200,000. The company requires a return on investment of 18%.
Required:
i. Calculate the company's current return on investment and residual income.
ii. The company is investigating an investment of $500,000 in a project that will generate annual net operating income of $105,000. What is the ROI of the project? What is the residual income of the project? Should the company invest in this project?