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Division A of Aigburth Co is considering a project which will increase annual net profit after tax by $30,000, but will require average inventory levels to increase by $200,000. The current target return on investment is 13% and the imputed interest cost of capital is 12%. In these circumstances would the return on investment (ROI) and/or residual income (RI) criteria motivate the managers of division A to act in the interests of the group as a whole? A. ROI - yes, RI - yes. B. ROI - no, RI - no. C. ROI - no, RI - yes. D. ROI - yes, RI - no. |