Wendell Division Has Operating Income of $40,000 for the Year

question 19

Multiple Choice

Wendell Division has operating income of $40,000 for the year ending December 31,2011.Average invested capital is $800,000 and the weighted-average cost of capital is 10%.The division is considering a new investment that would cost $800,000 and earn 7% annually.If economic profit is the performance metric,should the manager of the Wendell Division accept the new investment?

• A) No, because the return on investment of the division decreases with the new investment.
• B) No, because the economic profit for the investment is negative.
• C) Yes, because the economic profit for the investment is positive.
• D) Yes, because the return on investment of the division increases with the new investment.

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Definitions:

Transcriptional

Pertaining to transcription, the process by which genetic information from DNA is copied to RNA, leading to protein synthesis.

Posttranscriptional

Pertaining to modifications and processes that occur in a eukaryotic cell after transcription of DNA into RNA, affecting mRNA stability, translation, and other aspects.

Pretranscriptional

Pertaining to the biological regulatory processes that occur before the transcription of DNA to RNA.

Translational

Pertaining to the process of translating research findings or scientific discoveries into practical application or therapeutic solutions.