The office product division in Hulk Company reported $11,250 net operating income with $75,000 average operating assets this year The office product division has a new investment opportunity that would increase net operating income by $4,375 with $35,000 additional investment (Q) Which of the following statements is TRUE given that the company's minimum required rate of return is 10 If the division is evaluated on the basis of Residual income, the manager of the office product division would accept the new investment because it is good for the division If the division is evaluated on the basis of ROI, the manager of the office product division would accept the new investment because it is good for the division If the division is evaluated on the basis of ROI, the manager of the office product division would not accept the new investment because it is bad for the company If the division is evaluated on the basis of Residual income, the manager of the office product division would not accept the new investment because it is bad for the company Regardless of whether the division is evaluated on the basis of ROI or Residual income, the manager will not accept the new investment because it is bad for the company

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Posted on Sep 07, 2024

The office product division in Hulk Company reported $11,250 net operating income with $75,000 average operating assets this year. The office product division has a

The office product division in Hulk Company reported $11,250 net operating income with $75,000 average operating assets this year. The office product division has a new investment opportunity that would increase net operating income by $4,375 with $35,000 additional investment.

(Q) Which of the following statements is TRUE given that the company's minimum required rate of return is 10%?

If the division is evaluated on the basis of Residual income, the manager of the office product division would accept the new investment because it is good for the division.
If the division is evaluated on the basis of ROI, the manager of the office product division would accept the new investment because it is good for the division.
If the division is evaluated on the basis of ROI, the manager of the office product division would not accept the new investment because it is bad for the company.
If the division is evaluated on the basis of Residual income, the manager of the office product division would not accept the new investment because it is bad for the company.
Regardless of whether the division is evaluated on the basis of ROI or Residual income, the manager will not accept the new investment because it is bad for the company.