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Hershey's Chocolate Factory has the following financial data from 2 of its divisions : Division #1 Division #2 4,000,000 $ 6,000,000 Average Operating Assets Operating
Hershey's Chocolate Factory has the following financial data from 2 of its divisions : Division #1 Division #2 4,000,000 $ 6,000,000 Average Operating Assets Operating Income $350,000 $ 800,000 8% 12% Minimum rate of return for this division $2,000,000 $ 4,000,000 Sales Evaluate the following statements: 1. If Division #1 is offered an investment opportunity that has an ROI of 8.5% and the manager of the division is evaluated based on Residual Income, the manager will likely reject the project. 2. If Division #2 is offered an investment opportunity that has an ROI of 13% and the manager of the division is evaluated based on Return on Investment, the manager will likely accept the project 3. If Division #2 is offered an investment opportunity that has an ROI of 13% and the manager of the division is evaluated based on Residual Income, the manager will likely accept the project. O Only Statement #2 is true Both Statement #1 and #2 are true o Only Statement #3 is true Only Statement #1 is true O All of the Statements are true O Both Statement #1 and #3 are true Both Statement #2 and 3 are true
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