Question
Consider the following data for EveGreen, Inc., : Operating income $2,000,000 Average invested assets 6,000,000 ROI 33.33% Assumed EveGreen, Inc. uses a hurdle rate of
Consider the following data for EveGreen, Inc., :
| Operating income | $2,000,000 |
| Average invested assets | 6,000,000 |
| ROI | 33.33% |
Assumed EveGreen, Inc. uses a hurdle rate of 10% compute the divisions residual income.
Required:
(1) If the performance of the division manager is evaluated based on the division ROI and the division manager acts in personal interest, will the division manager accept the proposed project?
(2) The division manager is considering a proposed project with 25% ROI. If the performance of the division manager is evaluated based on the residual income and the division manager acts in personal interest, will the division manager accept the proposed project?
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Fundamentals Of Multinational Finance
Authors: Michael H. Moffett, Arthur I. Stonehill, David K. Eiteman
4th Edition
9780132138079
