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Accounting

The Eastern Division of Taxes Chemical Co. produced the following operating results for the previous year:

Sales	$10,000,000
Segment income	1,500,000
Assets	6,000,000

The Eastern Division is considering a $1,000,000 investment in a new project. The Eastern Division estimates that its return on investment (for all its operations) would be at 22% with the new investment.

Refer to Eastern Division. How much net segment income is the new project expected to produce?

Refer to Eastern Division. If the manager of the Eastern Division is evaluated on return on investment alone, will the manager invest in the new project? Explain.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9169917

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