Impact of New Investment on ROI, Residual Income The Alpha Division of Mayfield Company had an…

Impact of New Investment on ROI, Residual Income

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The Alpha Division of Mayfield Company had an operating income of $135,000 and net assets of $560,000. Mayfield has a required rate of return of 14 percent. Alpha has an opportunity to increase operating income by $32,000 with a $92,000 investment in assets. Compute Alpha Division’s return on investment and residual income currently and if it undertakes the project.