Evaluating segments based on the segment's return on investment will
A)encourage each segment's manager to select only projects that are above the company's current return on investment.
B)encourage each segment's manager to only select projects that are above the individual segment's current return on investment.
C)encourage each segment's manager to select only projects below the company's required rate of return.
D)encourage managers to select only projects below the segment's cost of capital.

Question

Quizplus · Accepted Answer

Evaluating segments based on the segment's return on investment will encourage each segment's manager to only select projects that are above the individual segment's current return on investment. This is because each segment is evaluated based on its own performance and profitability, rather than the overall company's performance. This will incentivize managers to choose projects that will maximize their own segment's profits and improve their own return on investment.

Evaluating Segments Based on the Segment's Return on Investment Will