The following information is provided: $\begin{array}{rrr}
& \text { Operating } & \text { Average Operating } \
\text { Froject } & \text { Income } & \text { Investment }\
\hline\text {A }& £ 44,000 & £ 400,000 \
\text { B } & 70,000 & 800,000 \
\text { C } & 30,000 & 600,000
\end{array}$
Assume the division's current ROI is 10 per cent and the firm's minimum required rate of return is 8 per cent.

If you were the division manager and you were evaluated based on ROI, which projects would you accept?
A)Projects A, B, and C
B)Projects A and C
C)Projects A and B
D)Project A only

Question

The following information is provided: $\begin{array}{rrr}
& \text { Operating } & \text { Average Operating } \
\text { Froject } & \text { Income } & \text { Investment }\
\hline\text {A }& £ 44,000 & £ 400,000 \
\text { B } & 70,000 & 800,000 \
\text { C } & 30,000 & 600,000
\end{array}$
 Assume the division's current ROI is 10 per cent and the firm's minimum required rate of return is 8 per cent.

If you were the division manager and you were evaluated based on ROI, which projects would you accept?
A)Projects A, B, and C
B)Projects A and C
C)Projects A and B
D)Project A only

Quizplus · Accepted Answer

To determine which projects the division manager should accept based on ROI, we need to calculate the ROI for each project. We can use the following formula:
ROI = (gain from investment - cost of investment) / cost of investment

Project A: ROI = (210,000 - 190,000) / 190,000 = 10.5%
Project B: ROI = (75,000 - 70,000) / 70,000 = 7.1%
Project C: ROI = (120,000 - 110,000) / 110,000 = 9.1%

Since the division's current ROI is 10 per cent and the firm's minimum required rate of return is 8 per cent, the manager should only accept projects with an ROI greater than 10 per cent, which is the current ROI. Based on the calculations, only Project A has an ROI greater than 10 per cent, so the division manager should only accept Project A. The other two projects do not meet the minimum ROI requirement. Therefore, the answer is D) Project A only.

The Following Information Is Provided Assume the Division's Current ROI Is 10 Per Cent and