$\begin{array}{lr}\text { Sales } & \$ 185,000 \\\text { Operating income } & \$ 60,000 \\\text { Operating assets } & \$ 375,000\end{array}$

question 46

Multiple Choice

$\begin{array}{lr}\text { Sales } & \$ 185,000 \\\text { Operating income } & \$ 60,000 \\\text { Operating assets } & \$ 375,000\end{array}$ The manager can invest in an additional project that would require $40,000 investment in additional assets and would generate $6,000 of additional income. The company's minimum rate of return is 14%.
-Refer to Figure 12-2. Which of the following statements is true?

• A) If the manager invests in the additional project, ROI of the division will decrease.
• B) The residual income of the project is less than the residual income of the division without the project; therefore the project will be rejected.
• C) Average investment for Stock Division will decrease if the project is accepted for investment.
• D) If the manager invests in the additional project, residual income of the division will increase.
• E) None of these.

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