Markas Hasan, CFO for American National Air, is evaluating the possible takeover of a
competitor air carrier. He found a Return on Investment, ROI, of 35% for the hostile take over.
Markas should:
Ignore the ROI because of theoretical problems with the method.
Compare the ROI to the corporation's cost of capital and accept the project if greater than what it cost
the company to borrow the funds.
Recalculate the ROI because the rate is above the usual range of a standard ROI of 15 to 25%.
Proceed with the takeover given the high profitability.