KHD Industries is a multidivisional firm that evaluates its managers based on the return on investment (ROI) earned by their divisions. The evaluation and compensation plans use a targeted ROI of 15% (equal to the cost of capital), and managers receive a bonus of 5% of basic compensation for every one-percentage point that the division’s ROI exceeds 15%. David Evans, manager of the Consumer Products Division, has made a forecast of the division’s operations and finances for next year that indicates the ROI would be 24%. In addition, new short-term programs were identified by the Consumer Products Division and evaluated by the finance staff as follows.
Program ..Projected ROI
A .........13%
B .........19%
C .........22%
D .........31%
Assuming no restrictions on expenditures, what is the optimal mix of new programs that would add value to KHD Industries?