Question

An investment center manager of Anheuser-Busch InBev is considering three possible investments. The company’s required return is 10%. The required asset investment, controllable margins, and the ROIs of each investment are as follows: Project AA BB CC Average Investment $160,000 140,000 220,000 Controllable Margin ROI $32,000 20.0% 16,000 11.4% 66,000 30% The investment center is currently generating an ROI of 23% based on $1,200,000 in operating assets and a controllable margin of $276,000.

INSTRUCTIONS If the manager can select only one project, determine which one is the best choice to increase the investment center’s ROI. Compute how much the investment center’s ROI will be if the manager selects your recommendation. ¿What additional advice would you give to the investment center ́s manager of Anheuser-Busch InBev?

Answer 1