Question: Section C: Three optional problems - answer any TWO problems from this section (2 x 28 pts each- 56 pts). Problem #1 (28 points) During
Section C: Three optional problems - answer any TWO problems from this section (2 x 28 pts each- 56 pts). Problem #1 (28 points) During 2015, Heady Company (HC) reported operating income of $30,000,000 on operating assets of the company's Speaker Division (SD) reported income cf $6,000,000 on operating assets of $30,000,000. Heady has offered the SD division $7,500,000 of additional operating assets to invest in new projects. The m generate additional income of $1,200,000 from these new assets. Heady Company has a desired/target return on investment (ROI) of 12 percent. Required: a. Provide ROI calculations for each of the following: i. The Heady company ii. The SD Division anager of the SD's division thinks she could ii. The additional investment opportunity b. Provide residual income (RI) calculations for each of the following: i. The Heady company ii. The SD Division ii. The additional investment opportunity c. Use supporting calculations to explain whether the SD division's manager would decide to undertake the additional investment opportunity assuming that:: i. She is paid a bonus based upon her division's total ROI. ii. She is paid a bonus based upon her division's total RI
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