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The Navajo Corporation had net operating income of $510,000 and average operating assets of $3,000,000. The corporation's minimum required return on new projects is 15%.

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The Navajo Corporation had net operating income of $510,000 and average operating assets of $3,000,000. The corporation's minimum required return on new projects is 15%. At the beginning of the year, the North Division of the corporation is considering an investment of $85,000 in a project that will generate a net operating income of $16.150. The North Division currently earns a return on investment rate of 20%. The North division manager can be evaluated based on either the division's ROI (return on investment) or the division's residual income. Which of the following is true? A The North Division manager would invest in the new project regardless of whether her bonus is based on ROI or residual income, because it is good for the company. B The North Division manager would NOT invest in the new project if her bonus is based on residual income, because the residual income on the new project is negative. C. The North Division manager would invest in the new project if her bonus is based on ROI, because the ROI on the new project is more than the company's minimum required rate of return. D. The North Division manager would invest in the new project if her bonus is based on ROI, because the ROI on the new project is more than the company's overall ROI. E. The North Division manager would NOT invest in the new project if her bonus is based on ROI, because the ROI on the new project is less than the division's current ROI

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