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Question(s) / Instruction(s):

An investment center manager is considering three possible investments. The company's required return is 10%. The required asset investment, controllable margins, and the ROIs of each investment are as follows:

Project                 Average Investment      Controllable Margin        ROI

Bud                        $160,000                              $32,000                 20.0%

Wise                      140,000                 16,000                                   11.4%

Er                            220,000                 66,000                                   30.00%

The investment center is currently generating an ROI of 25% based on $1,200,000 in operating assets and a controllable margin of $300,000.

Instructions

If the manager can select only one project, determine which one is the best choice to increase the investment center's ROI. Compute how much the investment center's ROI will be if the manager selects your recommendation.

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