Paula Boothe, president of the Pina Corporation, has mandated a minimum 12% retu
ID: 2580281 • Letter: P
Question
Paula Boothe, president of the Pina Corporation, has mandated a minimum 12% return on investment for any project undertaken by the company. Given the company’s decentralization, Paula leaves all investment decisions to the divisional managers as long as they anticipate a minimum rate of return of at least 12%. The Energy Drinks division, under the direction of manager Martin Koch, has achieved a 14% return on investment for the past three years. This year is not expected to be different from the past three. Koch has just received a proposal to invest $1,800,000 in a new line of energy drinks that is expected to generate $249,000 in operating income.
(a)
Paula Boothe, president of the Pina Corporation, has mandated a minimum 12% return on investment for any project undertaken by the company. Given the company’s decentralization, Paula leaves all investment decisions to the divisional managers as long as they anticipate a minimum rate of return of at least 12%. The Energy Drinks division, under the direction of manager Martin Koch, has achieved a 14% return on investment for the past three years. This year is not expected to be different from the past three. Koch has just received a proposal to invest $1,800,000 in a new line of energy drinks that is expected to generate $249,000 in operating income.
Explanation / Answer
Dear Student Thank you for using Chegg Please find below the answer and please give thumbs up Statementshowing Computations Paticulars Amount Investment in project 1,800,000.00 operating income. 249,000.00 return on investment = 249000/1800,000 13.83%