A company has three divisions, each of which is an investment centre. The divisional managers' performance is assessed using return on investment (ROI). A higher ROI will result in a higher bonus for the divisional manager. The company's cost of capital is 15%.
For the forthcoming year each divisional manager has one investment opportunity available as follows:
The manager(s) of which division(s) will proceed with their respective investment opportunity?
Company D is about to launch an innovative and unique product which may face direct competition within three years. The company needs to achieve a rapid payback on all investments because it has limited access to external finance. Which is the most appropriate pricing strategy for company D's new product, and for what reason?