Calculate the new ROI if this new program was introduced

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Question - The Board of CLC and the CEO have decided on a set of strategies with the goal of expanding their offering to regular guests by setting up a loyalty program. The extra costs of this loyalty program would include an additional $8,000,000 in software and setup (capital) costs and it is expected that this would generate an additional $5,000,000 in sales however profit margin (after running costs) would initially fall to 22%.

a) Calculate the new ROI if this new program was introduced.

b) Discuss how the manager may feel about this new innovation if the costs affected the ROI and therefore the bonus payable

c) If CLC went ahead with the new program and used Economic Value Add (EVA) to also balance and measure performance, would the manager be more or less in favour of the proposal?

Reference no: EM132681979

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