Question
Which of the following best describes incentives of division managers, who have control over investments, if they are evaluated based on their return on investment?
Which of the following best describes incentives of division managers, who have control over investments, if they are evaluated based on their return on investment?
Group of answer choices
all division managers have incentives to underinvest.
all division managers have incentives to overinvest.
managers of all profitable division have incentives to overinvest.
managers of all unprofitable division have incentives to underinvest.
managers whose returns exceed corporate cost of capital have incentives to underinvest.
managers whose returns are below corporate cost of capital have incentives to overinvest.
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