Brady Division Has Operating Income of $200,000 for the Year

question 99

Multiple Choice

Brady Division has operating income of $200,000 for the year ending December 31,2011.Average invested capital is $1,000,000 and the weighted-average cost of capital is 10%.The division is considering a new investment that would cost $500,000 and earn 15% annually.If return on investment is the performance metric,should the manager of the Brady Division accept the new investment?

• A) No, because the return on investment of the division decreases with the new investment.
• B) No, because the return on investment of the division increases with the new investment.
• C) Yes, because the return on investment of the division decreases with the new investment.
• D) Yes, because the return on investment of the division increases with the new investment.

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Definitions:

Analyzing the Audience

The process of examining and understanding the characteristics, needs, and preferences of the intended recipients of a message.

Conducting Research

The systematic investigation into and study of materials and sources to establish facts and reach new conclusions.

Employee Benefit Costs

The expenses incurred by employers to provide non-wage compensations such as health insurance, retirement plans, and time off to their employees.

Capturing Listeners' Attention

The act of engaging an audience's interest or focus at the beginning of a communication.