An investment center manager is considering three possible investments. The company’s required return is 10%. The required asset investment, controllable margins, and the ROIs of each investment are as follows: Project Average Investment Controllable Margin AA $170,000 $44,960 BB 150,000 29,240 CC 230,000 79,640 The investment center is currently generating an ROI of 23% based on $1,210,000 in operating assets and a controllable margin of $289,000. If the manager can select only one project, determine which is the best choice to increase the investment center’s ROI by computing the investment center’s ROI for each of the investment alternatives. (Round answer to 1 decimal place, e.g. 52.5.)
An investment center manager is considering three possible investments. The company’s required return is 10%. The required asset investment, controllable margins, and the ROIs of each investment are as follows: Project Average Investment Controllable Margin AA $170,000 $44,960 BB 150,000 29,240 CC 230,000 79,640 The investment center is currently generating an ROI of 23% based on $1,210,000 in operating assets and a controllable margin of $289,000. If the manager can select only one project, determine which is the best choice to increase the investment center’s ROI by computing the investment center’s ROI for each of the investment alternatives. (Round answer to 1 decimal place, e.g. 52.5.)
Chapter16: Working Capital Policy And Short-term Financing
Section: Chapter Questions
Problem 4P
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Question
An investment center manager is considering three possible investments. The company’s required return is 10%. The required asset investment, controllable margins, and the ROIs of each investment are as follows:
Project
|
Average Investment
|
Controllable Margin
|
||||||||
---|---|---|---|---|---|---|---|---|---|---|
AA
|
$170,000 | $44,960 | ||||||||
BB
|
150,000 | 29,240 | ||||||||
CC
|
230,000 | 79,640 |
The investment center is currently generating an ROI of 23% based on $1,210,000 in operating assets and a controllable margin of $289,000.
If the manager can select only one project, determine which is the best choice to increase the investment center’s ROI by computing the investment center’s ROI for each of the investment alternatives. (Round answer to 1 decimal place, e.g. 52.5.)
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