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Hutchins Ceramics, a division of Pump Corporation, has an operating income of $65,000 and total assets of $430,000. The required rate of return for the
Hutchins Ceramics, a division of Pump Corporation, has an operating income of $65,000 and total assets of $430,000. The required rate of return for the company is 11%. The company is evaluating whether it should use ROI or RI as a measurement of performance for its division managers. The manager of Hutchins Ceramics has the opportunity to undertake a new project that will require an investment of $98,000. This investment would earn $17,000 for Hutchins Ceramics. Requirements aces.) H 1. What is the original ROI for Hutchins Ceramics (before making any additional investment)? 2. What would the ROI be for Hutchins Ceramics if this investment opportunity were undertaken? Would the manager of the Hutchins Ceramics division want to make this investment if she evaluated it based on ROI? Why or why not? 3. What is the ROI of the investment opportunity? Would the investment be desirable from the standpoint of Pump Corporation? Why or why not? 4. What would the RI be for Hutchins Ceramics if this investment opportunity were undertaken? Would the manager of the Hutchins Ceramics division want to make this investment if she evaluated it based on RI? Why or why not? 5. What is the Rl of the investment opportunity? Would the investment be desirable from the standpoint of Pump Corporation? Why or why not? 6. Which performance measurement method, ROI or RI, promotes goal congruence? Why? Nould the manager of F t two decimal places.) 11 M ROI? Why or why not? Print Done the division's ROI
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