Income from Operations, Invested Assets

Sporting Goods Division 80,000, 400,000

Health care divsion 41,600, 260,000

Commercial Division 70,400, 320,000

Assume that an investment opportunity has become available for the company that will require an investment of $1,000,000. Management has a required rate of return of 15%. This will not benefit the Sporting Goods division, so it will be shared equally by Healthcare division and Commercial division. Management estimates that additional income of $200,000 will be generated by this investment, thus, they estimate that it will have a ROI of 20%.

From the standpoint of the company overall, is this a good investment or not? WHY?

From the standpoint of the individual divisions, is this a good investment? Are the managers of the divisions in favor, yes or no and WHY?