Assume a Cool Dvision of General Appliance Corporation is considering purchasing an Air Conditioning Company that had the following results last year (in thousands). General Appliance Corporation target rate of return is 5% and the weighted average cost of capital is 10%. Its effective tax rate is 35%. Cool Division's current ROI is 20%.

Sales	$ 10,000,000
Operating income	2,000,000
Total assets	25,000,000
Current liabilities	820,000

What is the Air Conditioning Company's Return on Investment (ROI) and would Cool Division invest if they are evaluated based on ROI?

A.

8% and would invest

B.

20% and would invest

C.

8% and would not invest

D.

40% and would invest