Question
A division of a company currently has a return on investment of 16%, and its cost of capital is 8%. The division manager is considering
A division of a company currently has a return on investment of 16%, and its cost of capital is 8%. The division manager is considering an investment in a new project. Assuming the managers performance is evaluated by return on investment, which of the following statements is FALSE?
A. It is in the companys best interest to invest in the project if it returns at least 8%.
B. The division manager will most likely refuse to invest in the project if it will return 14%.
C. It is in the managers best interest to invest in the project only if it returns at least 16%.
D. It is in the companys best interest to make the investment only if it returns at least 16%.
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