[The following information applies to the questionsdisplayed below.]

Westerville Company reported the following results from lastyear’s operations:

Sales	$	1,500,000
Variableexpenses		730,000
Contributionmargin		770,000
Fixed expenses		470,000
Net operatingincome	$	300,000
Average operatingassets	$	937,500

This year, the company has a $362,500 investment opportunitywith the following cost and revenue characteristics:

Sales	$	580,000
Contribution marginratio		70	% of sales
Fixed expenses	$	319,000

The company’s minimum requiredrate of return is 10%.

12. What is the residual income of this year’s investmentopportunity? 13. If the company pursues the investment opportunity and otherwiseperforms the same as last year, what residual income will it earnthis year? 14. If Westerville’s chief executive officer will earn a bonus onlyif her residual income from this year exceeds her residual incomefrom last year, would she pursue the investment opportunity? Yes orNo ? 15-a. Assume that the contribution margin ratio of the investmentopportunity was 60% instead of 70%. If Westerville’s ChiefExecutive Officer will earn a bonus only if her residual incomefrom this year exceeds her residual income from last year, wouldshe pursue the investment opportunity? Yes or No    15-b. Would the owners of the company want her to pursue theinvestment opportunity? Yes or No