Paula Boothe, president of the Bramble Corporation, has mandated a minimum 9% return on investment for any project undertaken by the company. Given the company's decentralization, Paula leaves all investment decisions to the divisional managers as long as they anticipate a minimum rate of return of at least 11%. The Energy Drinks division, under the direction of manager Martin Koch, has achieved a 17% return on investment for the past three years. This year is not expected to be different from the past three. Koch has just received a proposal to invest $2,000,000 in a new line of energy drinks that is expected to generate $300,000 in operating income. Calculate the return on investment expected on the new line of energy drinks. (Round answer to 1 decimal place, e.g. 5.1%.) %

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Paula Boothe, president of the Bramble Corporation, has mandated a minimum 9% return on investment for any project
undertaken by the company. Given the company's decentralization, Paula leaves all investment decisions to the divisional
managers as long as they anticipate a minimum rate of return of at least 11%. The Energy Drinks division, under the direction
of manager Martin Koch, has achieved a 17% return on investment for the past three years. This year is not expected to be
different from the past three. Koch has just received a proposal to invest $2,000,000 in a new line of energy drinks that is
expected to generate $300,000 in operating income.
(a)
Calculate the return on investment expected on the new line of energy drinks. (Round answer to 1 decimal place, e.g.
5.1%.)
Return on Investment
eTextbook and Media
do
%
Transcribed Image Text:Paula Boothe, president of the Bramble Corporation, has mandated a minimum 9% return on investment for any project undertaken by the company. Given the company's decentralization, Paula leaves all investment decisions to the divisional managers as long as they anticipate a minimum rate of return of at least 11%. The Energy Drinks division, under the direction of manager Martin Koch, has achieved a 17% return on investment for the past three years. This year is not expected to be different from the past three. Koch has just received a proposal to invest $2,000,000 in a new line of energy drinks that is expected to generate $300,000 in operating income. (a) Calculate the return on investment expected on the new line of energy drinks. (Round answer to 1 decimal place, e.g. 5.1%.) Return on Investment eTextbook and Media do %
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