The Magellan 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 of $67,500. Assuming that Global uses an imputed interest charge of 14%, 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? Attractive to Magellan: ROI Attractive to Magellan: RI Attractive to Global a. Yes; Yes; Yes b. Yes; No; Yes c. No; Yes; Yes d. No; No; No
The Magellan 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 of $67,500. Assuming that Global uses an imputed interest charge of 14%, 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? Attractive to Magellan: ROI Attractive to Magellan: RI Attractive to Global a. Yes; Yes; Yes b. Yes; No; Yes c. No; Yes; Yes d. No; No; No
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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The Magellan 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 of $67,500. Assuming that Global uses an imputed interest charge of 14%, 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?
Attractive to Magellan: ROI Attractive to Magellan: RI Attractive to Global
a. Yes; Yes; Yes
b. Yes; No; Yes
c. No; Yes; Yes
d. No; No; No
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