Solution-Find which manager will exhibit behavior consistent

Find which manager will exhibit behavior consistent

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Reference no: EM132527582

Two division managers in NLH, Inc. are individually considering whether to invest in a new product. Before the investment, the Wales division manager earns an average return on investment of 11%. The Campbell division manager earns an average of 9.5%. Managers are compensated based on improving return on investment.

Projected profit from the investment is $20,000. The investment required for the project is $200,000.

The cost of capital at NLH, Inc. has been set by upper management at 9.5%.

Question 1: Which manager(s) will exhibit behavior consistent with the underinvestment problem?

Option a. Only the Wales division manager

Option b. Only the Campbell division manager

Option c. Both division managers

Option d. Neither division manager

Reference no: EM132527582

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Find which manager will exhibit behavior consistent

Reference no: EM132527582

Reference no: EM132527582

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