Question
Finley is the Manager of the Funky division at ABC, Inc. Finley's bonus increases as Funky's ROI Increases. ABC, Inc. currently has a required
Finley is the Manager of the "Funky" division at ABC, Inc. Finley's bonus increases as Funky's ROI Increases. ABC, Inc. currently has a required rate of return of 12%. Here is information for Funky division: Net Operating Income: $150,000 Residual Income: Average Assets: $50,000 $1,000,000 Finley has the opportunity to invest in a new project for Funky that has the following Jiata: Average operating assets Total liabilities Sales Contribution margin Net operating income $ 125,000 $ 50,000 $ 300,000 $ 75,000 $ 15,000 Given the above information and Finley's Incentive structure: (1) is Finley likely to accept or reject the project, and (2) Does ABC, Inc. want Finley to accept or reject the project?
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