Standard Media Has a Required Rate of Return of 5

question 11

Multiple Choice

Standard Media has a required rate of return of 5 percent, a cost of capital of 4 percent, and an income tax rate of 30 percent. The following information about its two divisions has been provided by management: $\begin{array}{lrr}&\text { Audio Division }&\text { Video Division }\\\hline\text { NOPAT } & \$ 1,400,000 & \$ 2,000,000 \\\text { Sales } & \$ 10,000,000 & \$ 12,500,000 \\\text { Invested capital } & \$ 15,000,000 & \$ 17,500,000\end{array}$ An opportunity is available that yields an expected income of $45,900 on an investment of $450,000. If the divisions are evaluated based on residual income, which division(s) will accept the opportunity?

• A) Both will accept.
• B) Neither will accept.
• C) Only the Video Division will accept.
• D) Only the Audio division will accept.

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Definitions:

Leadership Models

Theoretical frameworks that aim to explain how leadership is effectively exercised in different contexts or situations.

Coercive Leader Behavior

Leadership tactics that rely on force, threats, or punishment to influence the behavior of others.

Altruism

The selfless concern for the well-being of others, often characterized by acts of kindness and generosity without expecting anything in return.

Leadership Process

The methods and activities through which influence is exerted to guide, structure, and facilitate activities and relationships in a group or organization.