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Q9. The Multinational Corporation had net operating income of $380,000 and average operating assets of $2,000,000. The Corporation's minimum required rate of return on new
Q9. The Multinational Corporation had net operating income of $380,000 and average operating assets of $2,000,000. The Corporation's minimum required rate of return on new projects is 18%. The US Division of the Corporation is considering an investment of $70,000 in a project that will generate a net income of $15,000. The US Division currently earns a return on investment of 20%. The US division manager can be evaluated based on either the division's ROI (return on investment) or the division's RI (residual income). Which of the following is true? a) The US Division manager would invest in the new project only if the division's RO is used for evaluating the division manager b) The US Division manager would invest in the new project only if the division's Rl is us ed for evaluating the division manager. c) The US Division manager would always invest in the new project whether the division's RO or Rl is used for evaluating the division manager. d) The US Division manager would never invest in the new project whether the division's ROl or RI is used for evaluating the division manager. e) None of the above
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