Figure 3
Assume the division's current ROI is 10 percent and the firm's minimum required rate of return is 6 percent.
-Refer to Figure 3 above. If you were the president of the firm, which projects would you want the division manager to accept?
A) Projects A, B, and C
B) Projects B and C
C) Project A only
D) Project B only

Question

Quizplus · Accepted Answer

Projects B and C have a return on investment (ROI) greater than the firm's minimum required rate of return, meaning that they generate more return than the cost of capital. Project A has an ROI of 6 percent, which is equal to the minimum required rate of return, so it is borderline acceptable. Project D has an ROI of only 3 percent, which is lower than the minimum required rate of return, so it should not be accepted. Overall, the best choice would be to accept Projects B and C.

Figure 3 Assume the Division's Current ROI Is 10 Percent and the and the Firm's