Question No 7:
A company has three divisions, each of which is an investment centre. The divisional managers' performance is assessed using return on investment (ROI). A higher ROI will result in a higher bonus for the divisional manager. The company's cost of capital is 15%.
For the forthcoming year each divisional manager has one investment opportunity available as follows:
The manager(s) of which division(s) will proceed with their respective investment opportunity?
A. Division 2 and Division 3
B. Division 1 and Division 3
C. Division 1 only
D. Division 3 only
Answer: A
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