Question
Sunrise Corporation has a return on investment of 15%. A Sunrise division, which currently has a 13% ROI and $750,000 of residual income, is contemplating
Sunrise Corporation has a return on investment of 15%. A Sunrise division, which currently has a 13% ROI and $750,000 of residual income, is contemplating a massive new investment that will (1) reduce divisional ROI and (2) produce $120,000 of residual income. If Sunrise strives for goal congruence, the investment:
A. should not be acquired because it reduces divisional ROI.
B. should not be acquired because it produces $120,000 of residual income.
C. should not be acquired because the division's ROI is less than the corporate ROI before the investment is considered.
D. should be acquired because it produces $120,000 of residual income for the division.
E. should be acquired because after the acquisition, the division's ROI and residual income are both positive numbers.
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