Edmunds Division's Operating Results Include: Controllable Margin of $150,000, Sales

Edmunds Division's operating results include: controllable margin of $150,000, sales totaling $1,200,000, and average operating assets of $500,000. Edmunds is considering a project with sales of $100,000, expenses of $86,000, and an investment of average operating assets of $200,000. Edmunds's required rate of return is 9%. Should Edmunds accept this project?

A) Yes, ROI will drop by 6.6% which is still above the required rate of return.
B) No, the return is less than the required rate of 9%.
C) Yes, ROI still exceeds the cost of capital.
D) No, ROI will decrease to 7%.

Correct Answer:

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