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Camilla Enterprise is a multi-division company that sells egg-related products. The current ROI for Camilla Enterprise as a whole is 11%, and Camilla Enterprise has
Camilla Enterprise is a multi-division company that sells egg-related products. The current ROI for Camilla Enterprise as a whole is 11%, and Camilla Enterprise has a minimum required rate of return on all investments of 10%. Currently the egg-carton division has average total assets of $2,000,000 with operating income of $400,000. The manger of the egg-crate division is considering the purchase of a small company called L'oeuf Inc. The purchase of L'oeuf Inc. will require an investment of $800,000 and will increase the egg-crate division's operating income by $96,000. Bonuses in all the Camilla Enterprise divisions are awarded based on the difference between that division's ROl and the ROl of Camilla Enterprise as a whole. The more the division's ROl exceeds Camilla Enterprise ROI as a whole, the greater the manager's bonus. The ROl for the egg-crate division, after the purchase of L'oeuf Inc. would be: 11% 13% 18% 20%
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