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Shrewsbury Inc. reported the following results from last year's operations:
Shrewsbury Inc. reported the following results from last year's operations:
Sales$7,200,000
Variable expenses 5,400,000
Contribution margin 1,800,000
Fixed expenses 1,296,000
Net operating income$504,000
Average operating assets$4,000,000
At the beginning of this year, the company has a $800,000 investment opportunity with the following characteristics:
Sales$2,480,000
Contribution margin ratio 40% of sales
Fixed expenses$868,000
The company's minimum required rate of return is 14%.
If the company pursues the investment opportunity, this year's combined residual income for the entire company will be closest to:
- $628,000
- $672,000
- $23,200
- ($44,000)
