QUESTION 17

1. Smart Company requires a minimum of 12% rate of return in investments. The companys North Division is currently earning an ROI of 14%. North is currently considering the following projects:

   I: expected to generate a 11% ROI

   II: expected to generate a 13% ROI

   If residual income is the performance measure for North, North will:

   	A.	Accept both I and II.
   	B.	Accept I and Reject II.
   	C.	Reject I and Accept II.
   	D.	Reject both I and II.

1 points

QUESTION 18

1. A division is evaluated based on ROI or residual income. Which of the following actions is mostly likely to be taken by the division?

   	A.	Increase research and development expenditure by $300,000.
   	B.	Buy and keep a profitable asset throughout the year rather than buying it right after the years start and selling it right before the year end.
   	C.	Paying on accounts payable fast for $80,000.
   	D.	purchasing and keeping profitable assets rather than leasing them.