Analysis for Financial Management Eleventh Edition
Chapter 2
Question #6
6.Top management measures your division’s performance by calculating the division’s return on investment (ROI), defined as division operating income divided by division assets. Your division has done quite well recently; its ROI is 30 percent. You believe the division should invest in a new production process, but a colleague disagrees, pointing out that because the new investment’s first-year ROI is only 25 percent, it will hurt performance. How would you respond?
Categories: