Essay
Assume that you are the new CEO of a major corporation that has five major product lines each run as separate corporations. You discover that if you invested the company's money outside of the firm that it could earn a 15% rate of return on the investment. You tell all the presidents of each of these subsidiary companies that in order for them to remain with the company that their return on capital must equal to or exceed 15% rate of return. Use two economic principles discussed in chapter 1 to explain why the CEO's advice is sound.
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