Question

The Bishop Division of Kingley Corporation has a current ROI of 12 percent. The company target ROI is 8 percent. The Bishop Division has an opportunity to invest $6,000,000 at 10 percent but is reluctant to do so because its ROI will fall to 11.25 percent. The present investment base for the division is $10,000,000.

Required
Demonstrate how Kingley can motivate the Bishop Division to make the investment by using the residual income method.



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  • CreatedFebruary 07, 2014
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