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an acceptable level of return from corporate head quarters point of view

 
Michelle Gutierrez, manager of the Components Division of FX Corporation, is considering a new investment for her division. The division has an investment base of 4,000,000 and operating income of 600,000. The new investment of 500,000 supports corporate strategy and is expected to increase operating income by 50,000 next year, an acceptable level of return from corporate head quarters point of view.
 
(a) What is the current return on investment (ROI) for the Components Division?
 
(b) What will the ROI be if Michelle undertakes the new investment?
 
(c) Suppose Michelle's compensation consist of a salaryplus a bonus proportional to her division's ROI. Is Michelle's compensation with or withour the new investment?
 
(d) Suggest changes to FX Corporation's management that will better align performance evaluation and compensation with corporate goals.

May 10 2018 View more View Less

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