Ann Arbor Division of the Michigan Company has the following statistics for its most recent operations: Assets available for use (Market Value) $3,600,000 Assets available for use (Book Value) $2,000,000 Ann Arbor Division's return on investment 25% Ann Arbor Division's residual income 200,000 Return on investment (entire Michigan Company) 20% Refer to Michigan Company. If Michigan Company
evaluates its managers on the basis of return on investment, the manager of Ann Arbor Division would invest in a project costing $100,000 only if it increased net segment income by at least
a. $10,000.
b. $15,000.
c. $20,000.
d. $25,000.
D
$100,000 * .25 = $25,000
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What will be an ideal response?
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