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Requlred Information [The following Information applles to the questions displayed below.] Blackwood Industrles manufactures dle machinery. To meet Its expansion needs, It recently (2020) acquired
Requlred Information [The following Information applles to the questions displayed below.] Blackwood Industrles manufactures dle machinery. To meet Its expansion needs, It recently (2020) acquired one of Its suppllers, Delta Steel. To maintain Delta's separate Identity, Blackwood reports Delta's operations as an Investment center. Blackwood monitors all of Its Investment centers on the basis of return on Investment (ROI). Management bonuses are based on ROI, and all Investment centers are expected to earn a minimum 10% return before Income taxes. Delta's ROI has ranged from 14% to 18% since 2020 . The company recently had the opportunity for a new Investment that would have ylelded a 13\% ROl. However, divlsion management decided against the Investment because it belleved that the Investment would decrease the division's overall ROI. The 2022 operating statement for Delta follows. The division's operating assets were $40,000,000 at the end of 2022 , a 10% Increase over the 2021 year-end balance. 2. Which performance measure (ROl or RI) should Blackwood Industrles use to provide the proper Incentlve for each division to act autonomously In the firm's best Interests? Would Delta's management have been more IIkely o accept the capital Investment opportunity If RI had been used as a performance measure Instead of ROl? ExplaIn
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