Question
8 (2 Marks) Division D of Aimen Ltd is considering a project which will increase annual profit by Rs. 15,000 but will require average receivables
8 (2 Marks) Division D of Aimen Ltd is considering a project which will increase annual profit by Rs. 15,000 but will require average receivables levels to increase by Rs.100,000. The company's target return on investment is 10% and the minimum required rate of return is 9%. Division D currently earns a return on investment of 12.5%. Would the return on investment (ROI) and residual income (RI) performance measures motivate the manager of Division D to act in the interest of the Aimen company as a whole? (NB Please pick the letter "A" or "B" to answer the question. Both choices must be correct to earn the full mark for this question.)
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