ACCA · Question 13 · Divisional Performance
Section A
InvestBank evaluates its divisional managers based on Return on Investment (ROI). The target ROI is 15%. Division A currently has an ROI of 20%. The manager of Division A is considering a new project that requires an investment of $100,000 and will generate an annual controllable profit of $18,000.
Which of the following statements is true regarding the manager's likely decision and the concept of goal congruence?
Answer options:
The manager will accept the project because its ROI of 18% exceeds the company target of 15%, demonstrating goal congruence.
The manager will reject the project because its ROI of 18% is lower than the current divisional ROI of 20%, demonstrating a lack of goal congruence.
The manager will accept the project because Residual Income (RI) will increase, demonstrating goal congruence.
The manager will reject the project because its ROI of 18% is lower than the company target of 20%.
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