Cheryl Manners, division manager of Radiotech, Inc., was debating the merits of a new product-a weather radio that would put out a warning if the county in which the listener lived was under a severe thunderstorm or tornado alert. The budgeted income of the division was $480,000 with operating assets of $8,000,000. The proposed investment would add income of $270,000 and would require an additional investment in equipment of $1,500,000.
Required
1. Compute the ROI of:
a. the division if the radio project is not undertaken
b. the radio project alone
c. the division if the radio project is undertaken
2. Do you suppose that Cheryl will decide to invest in the new radio? Why or why not?