Braham Farms Has a Return on Investment of 15 Per

question 82

Multiple Choice

Braham Farms has a return on investment of 15 per cent. A Braham division, which currently has a return on investment of 13 per cent and $375 000 of residual income, is contemplating a large investment that will (1) reduce divisional return on investment and (2) produce residual income of $60 000. If Braham strives for goal congruence, the investment:

• A) should not be approved because it reduces divisional return on investment.
• B) should not be approved because the division's return on investment is less than the corporate return on investment before the investment is considered.
• C) should be approved because it produces $60 000 residual income for the division.
• D) should be approved because, after acquisition, the division's return on investment and residual income are both positive numbers.