Essay
For 2012, the New Products Division of Tellis Company had operating income of $7,000,000 and operating assets of $38,800,000. Tellis has set a target return on investment (ROI) of 14% for each of its divisions.
The New Products Division has developed a potential new product that would require $8,500,000 in operating assets and would be expected to provide $1,400,000 in operating income each year. Calculate ROI and residual income for this new product. Is the product acceptable from the company's point of view?
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ROI = $1,400,000/$8,500,000 = ...View Answer
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