The Manager of Gamma Division Projects the Following for Next $\begin{array}{ll}\text { Sales } & \$ 100,000 \\\text { Operating income } & \$ 30,000 \\\text { Operating assets } & \$ 200,000\end{array}$

question 28

Multiple Choice

The manager of Gamma Division projects the following for next year:
The manager can invest in an additional project that would require $30,000 investment in additional assets and would generate $4,200 of additional income. The company's minimum rate of return is 12%.
$\begin{array}{ll}\text { Sales } & \$ 100,000 \\\text { Operating income } & \$ 30,000 \\\text { Operating assets } & \$ 200,000\end{array}$
-Refer to the Figure.What will happen to Gamma Division if the manager invests in the additional project?

• A)If the manager invests in the additional project, ROI of the division will increase.
• B)If the manager uses ROI to decide to invest, residual income of the project is less than the residual income of the division without the project; therefore, the project will be rejected.
• C)If the manager invests in the project, average investment for Alpha Division will decrease.
• D)If the manager invests in the additional project, residual income of the division will increase.

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Definitions:

Range

The difference between the highest and lowest values in a set of numbers, indicating the spread or dispersion of the dataset.

Empirical Rule

The empirical rule, also known as the 68-95-99.7 rule, states that for a normal distribution, approximately 68% of the data falls within one standard deviation of the mean, 95% within two, and 99.7% within three.

Normal Curve

A symmetrical, bell-shaped curve that represents the distribution of values, deviations, or probabilities for a set of data in which most measurements cluster around the mean.

Bell-Shaped

A bell-shaped curve is a graph of a distribution that resembles the shape of a bell, typically representing a normal distribution in which the bulk of the values lie towards the center and taper off symmetrically towards the extremes.