a.Acme Manufacturing is a decentralized corporation. Divisions are treated as in

Question

a.Acme Manufacturing is a decentralized corporation. Divisions are treated as investment centers. In recent years, Acme has been running about 11% ROA for the corporation as a whole, and has a cost of capital of 8%. One of their most profitable divisions is Walker Products, which last year had ROA of 20% ($1,600,000 operating income on assets of $8,000,000). Walker has an opportunity to expand one of its plants to produce a promising new product. The expansion will cost two million dollars, and is expected to increase operating earnings to $1,900,000. What factors should Walker

Explanation / Answer

They have to consider the factor that whether their this new project increase ROA or not. If ROA increases then they should go with new project otherwise not

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---