Question

Brookings Company evaluates its managers on the basis of return on investment. Division Three has a return on investment (ROI) of 15% while the company as a whole has an ROI of only 10%. Which of the following performance measures will motivate the manager of Division Three to accept a project earning a 12% return?

A. Residual income
B. Neither ROI nor residual income will motivate the manager to accept the project.
C. Both ROI and residual income will motivate the manager to accept the project.
D. ROI

Answer 1

A. Residual income

Step-by-step explanation:

A return on investment which is lower(12%) than the manager's previous return on investment(15%) might be bad motivation for the manager as it reflects a lower performance measure than the manager's previous return on investment performance measure. However a residual income to add to OR supplement the ROI so that investment returns are still impressive could boost the motivation of the manager to accept the project.

Answer 2

A) Residual income

Step-by-step explanation: