Chapter 10, Problem 15F15

Westerville Company reported the following result from last year’s operations:

At the beginning of this year, the company has a $120,000 investment opportunity with following cost and revenue characteristics:
The company’s minimum required rate of return is 15%.
Required:
15. Assume that the contribution margin ratio of the investment opportunity was 50% instead of 60%. If Westerville’s chief executive officer will earn a bonus only if her residual income from this year exceeds her residual income from last year, would she pursue the investment opportunity? Would the owners of the company want her to pursue the investment opportunity?