The Parkes Division of Global Corporation, which has income of $250 000 and an asset investment of $1 562 500, is studying an investment opportunity that will cost $450 000 and yield a profit before tax of $67 500. Assuming that Global Corporation uses an imputed interest charge of 14 per cent, would the investment be attractive to:

1-Divisional management if ROI is used to evaluate divisional performance?

2-Divisional management if residual income (RI) is used to evaluate divisional performance?

3-The management of Global Corporation?

Option

Attractive to Parkes: ROI

Attractive to

Parkes: RI

Attractive to

Global Corp.

A.

Yes

Yes

Yes

B.

No

Yes

Yes

C.

No

Yes

No

D.

Yes

No

No

Select one:

a.Option B

b.Option A

c.Option C

d.Option D