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

question 66

Multiple Choice

Bombard 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 economic profit is the performance metric,should the manager of the Bombard 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 economic profit of the division increases with the new investment.
• D) Yes, because the return on investment of the division increases with the new investment.

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Definitions:

Dopamine

A neurotransmitter in the brain that plays key roles in regulating mood, motivation, pleasure, and motor control.

Serotonin

A neurotransmitter in the brain associated with mood regulation, digestion, sleep, memory, and other bodily functions.

Euphoric Rush

A sudden, intense feeling of happiness or exhilaration, typically resulting from the release of certain neurotransmitters.

Neural Activity

The functioning of neurons, including the transmission of electrical and chemical signals within the brain and nervous system.