Question
3) Brady Division has operating income of $200,000 for the year ending December 31, 2011. Average invested capital is $1,000,000 and the weighted-average cost of
3) Brady Division has operating income of $200,000 for the year ending December 31, 2011. Average invested capital is $1,000,000 and the weighted-average cost of capital is 10%. The division is considering a new investment that would cost $500,000 and earn 15% annually. If return on investment is the performance metric, should the manager of the Brady Division accept the new investment?
4) Wisconsin Division has operating income of $40,000 for the year ending December 31, 2011. Average invested capital is $800,000 and the weighted-average cost of capital is 10%. The division is considering a new investment that would cost $800,000 and earn 7% annually. If return on investment is the performance metric, should the manager of the Wisconsin Division accept the new investment?
5) Bombard Division has operating income of $200,000 for the year ending December 31, 2011. Average invested capital is $1,000,000 and the weighted-average cost of capital is 10%. The division is considering a new investment that would cost $500,000 and earn 15% annually. If economic profit is the performance metric, should the manager of the Bombard Division accept the new investment?
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Advanced Financial Accounting
Authors: Thomas Beechy, Umashanker Trivedi, Kenneth MacAulay
6th edition
013703038X, 978-0137030385
