Performance mgm

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February 1, 2021 at 4:55 pm #608779
jaynn
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Example 2
A division currently earns a return on investment (ROI) of 20%. It is considering investing in a project which has
a residual income (RI) of $1,000 at an imputed interest charge of 20%.

What is the effect on the division’s ROI if the project is undertaken?

A Increase
B Decrease
C Remain the same
D Not possible to tell from this information
February 2, 2021 at 7:15 am #608816
John Moffat
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Sine the RI is positive, the profit must be more than 20% of the amount invested, and therefore the ROI will be more than 20% if they invest in the project.
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