Familia Inc.reported the following results from last year's operations: At the beginning of this year, the company has a $1,200,000 investment opportunity with the following characteristics: The company's minimum required rate of return is 13%.
Required:
1.What was last year's return on investment (ROI)? (Round to the nearest 0.1%.)
2.What is the ROI related to this year's investment opportunity? (Round to the nearest 0.1%.)
3.If the company pursues the investment opportunity and otherwise performs the same as last year, what will be the overall ROI will this year? (Round to the nearest 0.1%.)
4.If Westerville's chief executive officer earns a bonus only if the ROI for this year exceeds the ROI for last year, would the CEO pursue the investment opportunity? Would the owners of the company want the CEO to pursue the investment opportunity?

Question

Familia Inc.reported the following results from last year's operations:  At the beginning of this year, the company has a $1,200,000 investment opportunity with the following characteristics:  The company's minimum required rate of return is 13%.
Required:
1.What was last year's return on investment (ROI)? (Round to the nearest 0.1%.)
2.What is the ROI related to this year's investment opportunity? (Round to the nearest 0.1%.)
3.If the company pursues the investment opportunity and otherwise performs the same as last year, what will be the overall ROI will this year? (Round to the nearest 0.1%.)
4.If Westerville's chief executive officer earns a bonus only if the ROI for this year exceeds the ROI for last year, would the CEO pursue the investment opportunity? Would the owners of the company want the CEO to pursue the investment opportunity?

Quizplus · Accepted Answer

The Answer of Familia Inc.reported the following results from last year's operations:  At the beginning of this year, the company has a $1,200,000 investment opportunity with the following characteristics:  The company's minimum required rate of return is 13%.
Required:
1.What was last year's return on investment (ROI)? (Round to the nearest 0.1%.)
2.What is the ROI related to this year's investment opportunity? (Round to the nearest 0.1%.)
3.If the company pursues the investment opportunity and otherwise performs the same as last year, what will be the overall ROI will this year? (Round to the nearest 0.1%.)
4.If Westerville's chief executive officer earns a bonus only if the ROI for this year exceeds the ROI for last year, would the CEO pursue the investment opportunity? Would the owners of the company want the CEO to pursue the investment opportunity?