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Herb Huskie currently has an ROI of 16%, average operating assets of $1,500,000 and NOI of...

Herb Huskie currently has an ROI of 16%, average operating assets of $1,500,000 and NOI of $240,000. The minimum required rate of return is 10%. Huskie can make an investment of $250,000 for a new project that would generate a NOI of $30,000. Using residual income, would Huskie make this investment?

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Answer #1
Herb huskie ROI 16%
New project Investment 250000
NOI from the new project 30000
Minimum Required rate of return 10%
ROI from New project 12%
(30000/250000)
Since the ROI is more than the minimum required return herb huskie can make decision to make investment in new project. Returns are lesser than current project but can make decision to invest in new project.
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