Edith Carolina is president of the Deed Corporation. The company is decentralized, and leaves investment decisions up to the discretion of the division managers. Michael Sanders, manager of the Cosmetics Division, has had a return on investment of 14% for his division for the past three years and expects the division to have the same return in the coming year. Sanders has the opportunity to invest in a new line of cosmetics which is expected to have a return on investment of 12%. The company's minimum required rate of return is 8%. Suppose Deed Corporation evaluates managerial performance using return on investment. Edith Carolina, as president of the company, may view the opportunity for taking on the cosmetics line differently from Michael Sanders, manager of the Cosmetics Division. What action would each of them prefer with respect to the decision of whether to take on the new cosmetics line?
$\begin{array}{lll}
& \text { Carolina } & \text { Sanders } \
\text { A) } & \text { accept } & \text { reject } \
\text { B) } & \text { reject } & \text { accept } \
\text { C) } & \text { accept } & \text { accept } \
\text { D) } & \text { reject } & \text { reject }
\end{array}$

Question

Edith Carolina is president of the Deed Corporation. The company is decentralized, and leaves investment decisions up to the discretion of the division managers. Michael Sanders, manager of the Cosmetics Division, has had a return on investment of 14% for his division for the past three years and expects the division to have the same return in the coming year. Sanders has the opportunity to invest in a new line of cosmetics which is expected to have a return on investment of 12%. The company's minimum required rate of return is 8%. Suppose Deed Corporation evaluates managerial performance using return on investment. Edith Carolina, as president of the company, may view the opportunity for taking on the cosmetics line differently from Michael Sanders, manager of the Cosmetics Division. What action would each of them prefer with respect to the decision of whether to take on the new cosmetics line?
$\begin{array}{lll}
 & \text { Carolina } & \text { Sanders } \
\text { A) } & \text { accept } & \text { reject } \
\text { B) } & \text { reject } & \text { accept } \
\text { C) } & \text { accept } & \text { accept } \
\text { D) } & \text { reject } & \text { reject }
\end{array}$

Quizplus · Accepted Answer

Carolina may prefer to accept the new cosmetics line because it exceeds the company's minimum required rate of return of 8%, indicating it is a profitable investment for the company. Sanders, however, may prefer to reject it because the new line's expected return of 12% is lower than his division's current return of 14%, which could negatively affect his division's overall performance evaluation based on return on investment.

Edith Carolina Is President of the Deed Corporation A) Choice a B) Choice B C) Choice C D)

Edith Carolina Is President of the Deed Corporation A) Choice a
B) Choice B
C) Choice C
D)