A division manager of Radiotech Inc. was debating the merits of a new product a weather radio that put out a warning if the county in which the listener lived was under a severe thunderstorm or tornado alert. The budgeted income of the division was $480,000 with operating assets of $8,000,000. The proposed investment would add income of $270,000 and would require an additional investment in equipment of $1,500,000.

Required

1. Compute the ROI of:

A. The division if the radio project is not undertaken.

B. The radio project alone.

C. The division if the radio project is undertaken.

2. Do you suppose that the division manager will decide to invest in the new radio? Why or why not?