Michael Cianci,manager of Division C of the FX Corporation,is Considering

question 30

Essay

Michael Cianci,manager of Division C of the FX Corporation,is considering a new investment for his division.The division currently has an investment base of $4,000,000,and operating income of approximately $600,000 per year.The new investment of $500,000 supports corporate strategy and is expected to increase operating income by $50,000 next year,an acceptable level of return from the standpoint of the corporation as a whole.
Required:
1.What is the current return on investment (ROI)for Division C?
2.What will be the ROI of the division if the new investment is undertaken?
3.Suppose the manager's compensation consists of a salary plus a bonus proportional to divisional ROI.Would the manager's compensation higher with or without the new investment?
4.Suggest changes to corporate management that will better align performance evaluation and compensation with corporate goals.

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Definitions:

Conservationists

Individuals or groups who advocate for the preservation and protection of the environment and wildlife.

Sierra Club

An environmental organization established in the United States, dedicated to the protection and preservation of the natural environment through advocacy and conservation efforts.

Hetch Hetchy

A valley in Yosemite National Park, controversially dammed in the early 20th century to provide water to San Francisco.

John Muir

An influential Scottish-American naturalist, author, and early advocate for the preservation of wilderness in the United States.