Residual income for the boxed candy division

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Reference no: EM13128358

Chocolate Enterprise is a multi-division company. The current ROI for Chocolate Enterprise as a whole is 11%, and Chocolate Enterprise has a minimum required rate of return on all investments of 10%. The most successful division within Chocolate Enterprise is the Boxed Candy division. Currently the boxed candy division has total assets of $2,000,000 with operating income of $400,000. The manger of the Boxed Candy division is considering the purchase of a small company called Truffles Inc. The purchase of Truffles Inc. will require an investment of $800,000 and with the synergy between the two companies will increase the Boxed Candy Division's operating income by $76,000. The residual income for the Boxed Candy Division after the purchase of Truffles Inc. will be? and would you expect them to purchase Truffles or Not purchase Truffles.

Reference no: EM13128358

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