Wisconsin Division Has Operating Income of $40,000 for the Year

Multiple Choice

Wisconsin Division has operating income of $40,000 for the year ending December 31,2011.Average invested capital is $800,000 and the weighted-average cost of capital is 10%.The division is considering a new investment that would cost $800,000 and earn 7% annually.If return on investment is the performance metric,should the manager of the Wisconsin Division accept the new investment?

A) No, because the return on investment of the division decreases with the new investment.
B) No, because the return on investment of the division increases with the new investment.
C) Yes, because the return on investment of the division decreases with the new investment.
D) Yes, because the return on investment of the division increases with the new investment.