An Investment Center Manager Is Considering Three Possible Investments

question 80

Essay

An investment center manager is considering three possible investments. The company's required return is 10%. The required asset investment, controllable margins, and the ROIs of each investment are as follows:
The investment center is currently generating an ROI of 25% based on $1,200,000 in operating assets and a controllable margin of $300,000.
Instructions
If the manager can select only one project, determine which one is the best choice to increase the investment center's ROI. Compute how much the investment center's ROI will be if the manager selects your recommendation.

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Definitions:

Unit Elastic

Unit elastic describes a situation in which the percentage change in quantity demanded is equal to the percentage change in price, resulting in no overall revenue change for the supplier.

Income Elasticity

A measure of how much the demand for a product or service changes with a change in the consumer's income.

Quantity Demanded

Quantity demanded is the total amount of goods or services that consumers are willing and able to purchase at a given price point, during a specified period.

Consumption

The expenditure by individuals on durable goods, nondurable goods, and services; represented by C.