Selatan Division is one of the divisions in Mega Berhad. Without new investment, Selatan Division is expected to achieve
Posted: Sat Feb 19, 2022 2:33 pm
Selatan Division is one of the divisions in Mega Berhad. Without
new investment, Selatan Division is expected to achieve operational
income of RM310,000, sales of RM3.45 million and net operational
assets of RM3 million in the next accounting
period. Selatan Division is currently considering
an investment that requires additional investment of RM700,000 and
increases the operational income by RM57,500 (sales increase by
RM575,000). The new investment will increase beginning operational
asset by RM700,000 and ending operational asset by RM500,000.
Assume minimum rate of return required by Mega Berhad is
7%.
Required:
If the divisional managers of Mega
Berhad are evaluated and rewarded with bonuses based on ROI, will
the Manager of Selatan Division accept the new investment?
Explain.
If the divisional managers of Mega
Berhad are evaluated and rewarded with bonuses based on RI, will
the Manager of Selatan Division accept the new investment?
Explain.
new investment, Selatan Division is expected to achieve operational
income of RM310,000, sales of RM3.45 million and net operational
assets of RM3 million in the next accounting
period. Selatan Division is currently considering
an investment that requires additional investment of RM700,000 and
increases the operational income by RM57,500 (sales increase by
RM575,000). The new investment will increase beginning operational
asset by RM700,000 and ending operational asset by RM500,000.
Assume minimum rate of return required by Mega Berhad is
7%.
Required:
If the divisional managers of Mega
Berhad are evaluated and rewarded with bonuses based on ROI, will
the Manager of Selatan Division accept the new investment?
Explain.
If the divisional managers of Mega
Berhad are evaluated and rewarded with bonuses based on RI, will
the Manager of Selatan Division accept the new investment?
Explain.