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Would the department manager be more likely to accept

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Department income totals $400,000, investment in the department is $4,000,000, and the company's cost of capital is 8%.

Required:

Problem a) Calculate the return on investment (ROI).

Problem b) Calculate economic value added.

Problem c) Assume there is a capital project that requires a $400,000 investment for a $36,000 return. Would the department manager be more likely to accept the project if department performance was evaluated using ROI or economic value added? Why?

Reference no: EM132680690

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