Question: Exercise 10-6 Botti Inc. operates on a decentralized basis and evaluates divisions and division managers' performance using Return on Investment (ROI). One of Botti's divisions
Exercise 10-6 Botti Inc. operates on a decentralized basis and evaluates divisions and division managers' performance using Return on Investment (ROI). One of Botti's divisions has $8,000,000 in invested capital and is expected to generate operating income of $1,800,000 over the coming year. The division manager is contemplating a new investment costing $2,000,000 that would generate income over the coming year of $350,000. Botti Inc.'s minimum desired ROI is 14%. Invested capital $ 8,000,000 Expected operating income $ 1,800,000 New investment $ 2,000,000 Investment income $ 350,000 Minimum desired ROI 14% Required- a. b. C. Will the division manager likely accept this project? Would senior management want the division manager to accept the project? What measure of performance would align the decision of the division manager to the objectives of senior management at Botti Inc
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