The Gallagher Company Is Decentralized and Has a Required Opportunity

question 40

Short Answer

The Gallagher Company is decentralized and has a required opportunity cost of capital of 20%. The West division, whose current return on investment (ROI) is 15%, is considering an investment which will earn a return of 18%. The East Division, whose current ROI is 25%, is considering an investment which will earn a return of 22%. If the objective is to maximize ROI, each division will make the following choice:

---

Definitions:

Analyze Ideas

The systematic examination of concepts or proposals to understand their components, relationships, and implications.

Persistent

The quality of continuing steadfastly or firmly in a course of action in spite of difficulty or opposition.

Mental Models

Internal representations of external reality that people use to understand and interact with the world around them, influencing decision-making and behavior.

Social Approval

The affirmative recognition or endorsement from others within a social context, often influencing behavior and decisions.