Jonathan is the manager of the equipment rental section of a large hardware store. Many customers have been requesting industrial wood floor sanders. Jonathan would be able to purchase one for the company for $3,675, but he knows that there are other costs and factors to consider. He believes that the sander would generate $1,342 of rental income in its first year and would incur $433 of expenses (not including depreciation). The sander has a 10-year useful life, and Jonathan suggests the use of straight-line depreciation. Jonathan is going to run some analysis prior to making a final suggestion to the store. (Do not round intermediate calculations.)
a. What is the Return on Investment (ROI) for the industrial wood floor sander using the DuPont method?
b. How much Residual Income (RI) will the sander generate if the Required Rate of Return is 8%?
c. Jonathan's section earned 15% ROI last year. If his evaluation is based upon ROI, then would he be likely to pursue the purchase of this Industrial Wood Floor Sander? Please explain your rationale.

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The Answer of Jonathan is the manager of the equipment rental section of a large hardware store. Many customers have been requesting industrial wood floor sanders. Jonathan would be able to purchase one for the company for $3,675, but he knows that there are other costs and factors to consider. He believes that the sander would generate $1,342 of rental income in its first year and would incur $433 of expenses (not including depreciation). The sander has a 10-year useful life, and Jonathan suggests the use of straight-line depreciation. Jonathan is going to run some analysis prior to making a final suggestion to the store. (Do not round intermediate calculations.)
a. What is the Return on Investment (ROI) for the industrial wood floor sander using the DuPont method?
b. How much Residual Income (RI) will the sander generate if the Required Rate of Return is 8%?
c. Jonathan's section earned 15% ROI last year. If his evaluation is based upon ROI, then would he be likely to pursue the purchase of this Industrial Wood Floor Sander? Please explain your rationale.

Jonathan Is the Manager of the Equipment Rental Section of a Large