Wescott Company has three divisions: A, B, and C. The

Wescott Company has three divisions: A, B, and C. The Company has a hurdle rate of 8 percent. Selected operating data for the three divisions are as follows:

Wescott is considering an expansion project in the upcoming year that will cost $7 million and return $565,000 per year. The project

Required

1. Compute the ROI for each division.

2. Compute the residual income for each division. (Loss amounts should be indicated by a minus sign.)

3. Rank the divisions according to the ROI and residual income of each.

4-b. Is this an acceptable project?

No

Yes