The following information pertains to a segment of the Moore Company.Invested capital is defined as total assets.The weighted average cost of capital is 10%.The ROI of the segment before the project is 20%.The ROI of the segment after the project is 18%.The manager is evaluated based on the segment's ROI.A project earning a ROI of 12% should be ________.
A) accepted
B) rejected
C) compared to the company's ROI
D) compared to the company's residual income

Question

Quizplus · Accepted Answer

Since the manager is evaluated based on the segment's ROI and the ROI of the segment after the project is lower than the weighted average cost of capital (10%), accepting the project with a ROI of 12% would further lower the segment's ROI, making it fall below the expected ROI. Therefore, the project should be rejected.

The Following Information Pertains to a Segment of the Moore