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Paula Booth, president of ABC Corp., is ordering that any project undertaken by the company must earn a minimum return of 10%. Given the company's centralization, Paula leaves all investment decisions to the divisional managers as long as they anticipate a minimum return of at least 10%. The manager of DEF division, Martin Koch, has achieved a 14% return on investment for the past three years. This year is not expected to be different from the past three years. Koch has just received a proposal to invest $1,800,000 in a new product line that is expected to generate $216,000 in operating income. 1) Calculate the return on investment expected on the new product line. 2) If Martin Koch is evaluated based on the division's return on investment, will he choose to invest in the new line? You must explain your answer - a yes/no answer is not sufficient. 3) Explain why Paula Booth would/would not prefer that Martin Koch invest in the new line. You must fully explain your answer.
4) Calculate the residual income for the proposed new product line.
5) If Martin Koch is evaluated based on residual income, will he choose to invest in the new product line? You must explain your answer - a yes/no answer is not sufficient.
What happens if a company is completely wrong and they lose a huge lawsuit from actions from a prior period. Should they go back and amend that prior year to show the estimated liability? Why or why not?
The Financial Statement Effects Template
david winner is to retire from the partnership of winner and associates as of the end of the current fiscal year.
sonne company produces a perfume called whim. the direct materials and direct labor standards for one bottle of whim
Speedy paid $90,000 of the fuel cost in May, with the remainder paid in June. In addition, Speedy paid $15,000 in May to another fuel supplier in an effort to build up its supply of fuel. Calculate the amount of expense recognized in May under accr..
Briefly describe three strategies for testing internal controls when information technology is used for significant accounting processing.
Business is going well for Email Designers. The board of directors of this family-owned company believes that Email Designers could earn an additional $1,000,000 income before interest and taxes by expanding into new markets. However, the $4,000,0..
brothers manufacturing applies overhead to production at a predetermined rate of 90 based on direct labor cost.job no.
Following is a list of events that occur throughout an audit examination. Indicate, using the correct letter, the time period during which these events are most likely to occur. An event may occur in more than one time period.
Watson Corporation owned 600,000 shares of Nixon Corporation stock. On December 31, 2012, when Watson's account "Investment in Common Stock of Nixon Corporation" had a carrying value of $5 per share, Watson distributed these shares to its stockhol..
Furthermore,the penalties and interest charged on delinquent taxes exceed the interest charges on the tax anticipation notes.
Prepare entries to record the purchase of the land, the cost and installation of machinery, the first five month's depletion assuming the land has a net salvage value of zero after the ore is mined
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