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Division B of a national house-building group is projected to earn profits of £4.5 million in the current year on capital employed at the year end of £25 million. The division has been set a target return on investment (ROI) of 20%.

Question 1 : The manager of division B is considering disposing of some slow-moving houses which have a full market value of £16 million, but are held in the books at cost of £12 million, for a reduced figure of £14 million. Which of the following statements is true?

A. The revised divisional ROI will be below 20% and the manager will make a goal congruent decision.

B. The revised divisional ROI will be above 20% and the manager will not make a goal congruent decision.

C. The revised divisional ROI will be below 20% and the manager will not make a goal congruent decision

D. The revised divisional ROI will be above 20% and the manager will make a goal congruent decision

Reference no: EM132565479

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