Jan Franks is the manager of one location of the Save Some Inc. chain. Frank’s location is currently earning an ROI of 15 percent on existing average capital of $800,000. The minimum required return for Save Some Inc. is 12 percent. Frank is considering several additional investment projects, which are independent of existing operations and are independent of each other. The following table lists the projects:

a. Which of the above projects would Frank choose for investment if his objective were to maximize his location’s ROI?
b. Which projects increase the value of Save Some Inc.?
c. Which projects have a negative residual income?
d. Create two rankings for the projects in the order of acceptability if Frank is evaluated (1) on ROI and (2) on residual income.
e. What are the components of ROI? Explain how the combination of components is useful in evaluating the success of business processes within afirm.

  • CreatedApril 17, 2014
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