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Question(s) / Instruction(s):

The area manager of the Little Italy Restaurants is considering two possible expansion alternatives. The required investments, expected controllable margins, and the ROIs of each are as follows:

Project Investment Controllable Margin               ROI

Charlotte $120,000    $30,000                       25%

Richmond  $540,000    $50,000                     9.25%

The Little Italy segment has currently $2,000,000 in invested capital and a controllable margin of $250,000. Which one of following projects will increase the Little Italy division’s ROI?

a.            Both the Charlotte and Richmond options

b.            Only the Charlotte option

c.             Only the Richmond option

d.            Neither the Charlotte nor the Richmond options

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